1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OXFORD AUTOMOTIVE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 3465 38-3262809
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
2365 FRANKLIN ROAD
BLOOMFIELD HILLS, MICHIGAN 48203
(248) 745-9600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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REX E. SCHLAYBAUGH, JR.
OXFORD AUTOMOTIVE, INC.
2365 FRANKLIN ROAD
BLOOMFIELD HILLS, MICHIGAN 48203
(248) 745-9600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
GERALD T. LIEVOIS
DYKEMA GOSSETT PLLC
1577 NORTH WOODWARD AVENUE, SUITE 300
BLOOMFIELD HILLS, MI 48304-2820
(248) 203-0866
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
==================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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10 1/8% Senior Subordinated
Notes Due 2007................ $125,000,000 100% $125,000,000 $37,878.78
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Guarantees of 10 1/8% Senior
Subordinated Notes Due 2007... (2) (2) (2) (2)
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(1) Estimated pursuant to Rule 457(f) solely for the purposes of calculating the
registration fee.
(2) Pursuant to Rule 457(n), no registration fee is required with respect to the
Guarantees of the Senior Subordinated Notes registered hereby.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
TABLE OF ADDITIONAL REGISTRANTS
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PRIMARY STANDARD
EXACT NAME OF GUARANTOR REGISTRANT JURISDICTION OF IRS EMPLOYER INDUSTRIAL CLASSIFICATION
AS SPECIFIED IN ITS CHARTER INCORPORATION IDENTIFICATION NO. CODE NUMBER
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Lobdell Emery Corporation................. Michigan 38-0768460 3465
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BMG North America Limited................. Ontario 98-0113060 3465
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BMG Holdings, Inc......................... Ontario 00-0000000 3465
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Winchester Fabrication Corporation........ Michigan 38-3209840 3465
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Creative Fabrication Corporation.......... Tennessee 62-1613148 3465
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Parallel Group International, Inc......... Indiana 35-1971190 3465
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Laserweld International, L.L.C. .......... Indiana 35-1969204 3465
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Concept Management Corporation............ Michigan 38-3209841 3465
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Lewis Emery Capital Corporation........... Michigan 38-6602578 3465
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CROSS-REFERENCE SHEET
FOR REGISTRATION STATEMENT ON FORM S-4 AND PROSPECTUS
S-4 ITEM LOCATION IN PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Facing Page of Registration Statement; Cross-Reference
Sheet; Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page of Prospectus; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............. Summary; Risk Factors, Summary Consolidated Historical
and Pro Forma Financial Data
4. Terms of the Transaction.................. Summary; The Exchange Offer; Description of the Notes;
Plan of Distribution
5. Pro Forma Financial Information........... Not Applicable
6. Material Contacts with the Company Being
Acquired.................................. Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters........................ Not Applicable
8. Interests of Named Experts and Counsel.... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants............................... Not Applicable
11. Incorporation of Certain Information by
Reference................................. Not Applicable
12. Information with Respect to S-2 or S-3
Registrants............................... Not Applicable
13. Incorporation of Certain Information by
Reference................................. Not Applicable
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants......... Summary; Risk Factors; Capitalization; Pro Forma Combined
Financial Data; Selected Consolidated Historical
Financial Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations; Business,
Management; Description of Certain Indebtedness and
Preferred Stock; Certain Transactions; Financial
Statements
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies................................. Not Applicable
16. Information with Respect to S-3 or S-2
Companies................................. Not Applicable
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies........... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited........ Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or
in an Exchange Offer...................... The Exchange Offer; Management; Principal Shareholders,
Certain Transactions; Description of Certain Indebtedness
and Preferred Stock; Description of the Notes
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
OFFER FOR ALL OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR 10 1/8% SENIOR SUBORDINATED
NOTES DUE 2007 OF
OXFORD AUTOMOTIVE, INC. OXFORD AUTOMOTIVE, INC. LOGO
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1997, UNLESS EXTENDED
Oxford Automotive, Inc. (the "Company"), hereby offers to exchange an
aggregate principal amount of up to $125,000,000 of its 10 1/8% Senior
Subordinated Notes Due 2007 (the "New Notes") for a like principal amount of its
10 1/8% Senior Subordinated Notes Due 2007 (the "Old Notes") outstanding on the
date hereof upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"). The New Notes and the Old Notes are
collectively hereinafter referred to as the "Notes." The terms of the New Notes
are identical in all material respects to those of the Old Notes, except for
certain transfer restrictions, registration rights and certain interest rate
step-up provisions relating to the Old Notes. The New Notes will be issued
pursuant to, and entitled to the benefits of, the Indenture (as defined herein)
governing the Old Notes. The New Notes will mature on June 15, 2007. The New
Notes will bear interest from and including the date of consummation of the
Exchange Offer. Interest on the New Notes will be payable semi-annually on June
15 and December 15 of each year, commencing December 15, 1997. Additionally,
interest on the New Notes will accrue from the last interest payment date on
which interest was paid on the Old Notes surrendered in exchange therefor or, if
no interest has been paid on the Old Notes, from the date of original issue of
the Old Notes. The New Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after June 15, 2002, at the redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the date
of redemption. In addition, at any time and from time to time prior to June 15,
2000, the Company may redeem in the aggregate up to 35% of the original
principal amount of the Notes with the net proceeds of one or more Public Equity
Offerings (as defined) following which there is a Public Market (as defined), at
a redemption price of 110.125% of the principal amount to be redeemed, plus
accrued and unpaid interest, if any, to the redemption date, provided that at
least 65% of the original principal amount of the Notes remains outstanding
after each such redemption. Upon a Change of Control (as defined), each holder
of Notes ("Holder") will have the right to require the Company to repurchase all
or a portion of such Holder's Notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase. See "Description of the Notes -- Change of Control."
The New Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined) of the Company. The New Notes will rank pari passu with or senior
to all subordinated indebtedness of the Company. The Company is a holding
company that will derive all of its operating income and cash flow from its
subsidiaries. The New Notes will be fully and unconditionally guaranteed
(collectively, the "Subsidiary Guaranties") on an unsecured, senior subordinated
basis by certain Restricted Subsidiaries (as defined) (collectively, the
"Subsidiary Guarantors") of the Company. See "Description of the Notes --
Subsidiary Guaranties."
As of March 31, 1997, on a pro forma basis after giving effect to the
offering of the Old Notes (the "Offering"), the Exchange Offer and the
application of the net proceeds thereof, the Company would have had no
outstanding Senior Indebtedness and the Subsidiary Guarantors' outstanding
Senior Indebtedness would have been approximately $16.7 million. See
"Description of the Notes -- Subordination." In addition, the Company would have
had available approximately $101.0 million of undrawn borrowings under its
Senior Credit Facility. The Indenture governing the Notes (the "Indenture")
permits the Company and the Subsidiary Guarantors to incur additional
indebtedness, including Senior Indebtedness and indebtedness that will rank pari
passu with the New Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company and the Subsidiary Guarantors contained in the
Registration Agreement dated June 24, 1997 (the "Registration Agreement"), among
the Company, the Subsidiary Guarantors and Salomon Brothers Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, McDonald & Company Securities, Inc., First
Chicago Capital Markets, Inc., and Schroder Wertheim & Co. Incorporated (the
last five named entities collectively referred to herein as the "Initial
Purchasers"), with respect to the initial sale of the Old Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date (as defined) for the Exchange Offer. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Old Notes
with respect to the Exchange Offer, the Company will promptly return such Old
Notes to the holders thereof. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. Each of the Company and
the Subsidiary Guarantors has agreed that, starting on the Expiration Date, and
ending on the close of business on the first anniversary of the Expiration Date,
it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the Old
Notes. If a market for the New Notes should develop, such New Notes could trade
at a discount from their principal amount. The Company currently does not intend
to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system and no active public market for
the New Notes is currently anticipated. There can be no assurance that an active
public market for the New Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange pursuant to the Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE , FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF THE NOTES IN CONNECTION WITH THE
EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is , 1997.
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AVAILABLE INFORMATION
The Company and the Subsidiary Guarantors have filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on Form S-4
(the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the New
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to the Company, the Subsidiary Guarantors and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to accurately describe the material terms so referred to, but
are not necessarily a complete description of the contents of any such contract,
agreement or other document. With respect to each such contract, agreement or
other document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Exchange Offer Registration Statement, including
the exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Commission at Seven
World Trade Center, Suite 1300, New York, New York 10048 and at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of such Web site is:
http://www.sec.gov.
As a result of the Exchange Offer, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. In the event the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company will be required under the Indenture to continue to file with
the Commission the annual and quarterly reports, information, documents or other
reports, including, without limitation, reports on Forms 10-K, 10-Q and 8-K,
which would be required pursuant to the informational requirements of the
Exchange Act. The Company will also furnish such other reports as may be
required by law. In addition, for so long as any of the Notes are restricted
securities within the meaning of Rule 144(a)(3) under the Securities Act, the
Company has agreed to make available to any prospective purchaser of the Notes
or beneficial owner of the Notes, in connection with any sale thereof, the
information required by Rule 144A(d)(4) under the Securities Act.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. For purposes of this Prospectus, the "Company" shall refer to
Oxford Automotive, Inc. ("Oxford Automotive") and all of its consolidated
subsidiaries, unless the context otherwise requires.
THE COMPANY
GENERAL
The Company is a leading Tier 1 designer and producer of high-quality,
engineered metal components, assemblies and modules used by original equipment
automotive manufacturers ("OEMs"). The Company's core products are complex, high
value-added products, primarily assemblies containing multiple stamped parts and
various welded, hemmed or fastened components. These products which range from
large structural stampings and assemblies, including exposed ("Class A")
surfaces, to smaller complex welded assemblies, are used in manufacturing a
variety of sport utility vehicles ("SUVs"), light and medium trucks, mini-vans,
vans and passenger cars. The Company is the sole source supplier of these
products to its customers. On a pro forma basis, assuming the acquisition of
Lobdell Emery Corporation ("Lobdell") (described below) had occurred on April 1,
1996, the Company would have had net sales of $330.2 million and Adjusted EBITDA
(as defined herein) of $28.2 million for the fiscal year ended March 31, 1997.
On a pro forma basis for the fiscal year ended March 31, 1997, assuming the
acquisitions of Lobdell and Howell Industries, Inc., a Michigan corporation
("Howell") (described below) had occurred on April 1, 1996, net sales and
Adjusted EBITDA for the Company would have been $421.7 million and $31.7
million, respectively. Based on pro forma net sales of $330.2 million,
management believes the Company is one of the ten largest suppliers of stampings
to the North American automotive market.
The Company's four largest customers, General Motors Corporation ("GM"),
Ford Motor Company ("Ford"), CAMI (a joint venture of GM and Suzuki Motor
Corporation ("Suzuki")) and The Saturn Corporation ("Saturn"), accounted for
approximately 56.0%, 33.0%, 3.0%, and 2.8%, respectively of the Company's net
sales for the fiscal year ended March 31, 1997, on a pro forma basis for the
Lobdell acquisition. The Company has been providing products directly to GM and
Ford for more than 50 years and has earned outstanding commercial ratings for
its high-quality standards, including GM's Supplier of the Year and Mark of
Excellence Awards, Ford's Q1 Award and CAMI's President's Award. The Company
also sells its products to other Tier 1 suppliers. For the fiscal year ended
March 31, 1997, approximately 72.0% of the Company's net sales, on a pro forma
basis assuming the acquisition of Lobdell occurred on April 1, 1996, were
derived from sales of its products manufactured for SUVs, mini-vans, vans and
light trucks. In recent years, SUVs, mini-vans, vans and light trucks have
experienced stronger growth in vehicle production as compared to the passenger
car sector, with a compound annual growth rate ("CAGR") from 1991 to 1996 of
approximately 8.7% as compared to (0.1%) for the passenger car sector. This
sector includes those platforms and models which have strong consumer demand,
such as GM's popular C/K platform (full-size pickups and the
Yukon/Tahoe/Suburban models) and the Ford Ranger, Explorer and Windstar.
The Company conducts its business through two principal operations, BMG
North America Limited ("BMG") and Lobdell. Since acquiring BMG in October 1995,
management of the Company has implemented significant cost reductions and
achieved manufacturing efficiencies, including manpower reductions consisting of
49 salaried positions (121 to 72) and 78 hourly employees (570 to 492) and
improved materials cost management, which includes purchasing cost savings,
reduction of scrap and inventory costs, and improved scheduling of production.
These actions resulted in a $4.6 million improvement in Adjusted EBITDA from the
fiscal year ended March 31, 1996 to the fiscal year ended March 31, 1997. The
same strategy utilized at BMG was implemented at Lobdell immediately following
its acquisition in January 1997. Since its acquisition of Lobdell, the Company
has achieved cost reductions totaling $13.6 million on an annual basis. In
addition to the cost reductions, the Company has been able to implement a number
of manufacturing policies that have improved productivity and quality,
notwithstanding overall staff reductions.
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The strategic combination of BMG and Lobdell significantly strengthens the
Company's position as a leading Tier 1 supplier of assemblies and modules to the
OEMs. This combination provides the Company with the critical mass and
capabilities in the areas of design and engineering, sales and marketing, and
product expertise which provide the basis for the Company's strategy of becoming
a fully-integrated, global systems supplier. The Company has already implemented
a successful, focused sales and marketing initiative, which commenced
concurrently with the operational improvements at BMG. As a result, the Company
has been awarded the door assemblies and the side panel package for the new
Saturn Innovate Program (the "Innovate Program"), the new vehicle which Saturn
is launching in 1999 based upon the current Opel Vectra. Management believes
these awards from Saturn will generate approximately $60.0 million of annual net
sales beginning with the 1999 model year.
The Company currently operates eight manufacturing facilities which offer
the latest technologies in metal stamping, welding and assembly production
equipment, including fully-automated hydraulic and wide-bed press lines (up to
180 inches), robotic welding cells, robotic hemming and autophoretic corrosion
resistant coating. Since 1992, the Company has invested in excess of $93.0
million in capital investments to support sales growth, expand production
capabilities and improve efficiency and flexibility. The Company's diverse line
of over 200 presses that range up to 2,500 tons and state-of-the-art robotic
weld assembly and hemming equipment are capable of manufacturing a broad
assortment of parts and assemblies ranging from simple stampings to full-size,
Class A door and closure panels. The Company is one of a few independent
suppliers that has the ability to produce large, complex stampings, as well as
the technical expertise and automated assembly capabilities that provide high
value-added modules such as door apertures and assemblies, A-pillars, Class A
surface products and control arms.
The principal executive offices of the Company are located at 2365 Franklin
Road, Bloomfield Hills, Michigan 48203, and its telephone number is (248)
745-9600.
BUSINESS STRATEGY
The principal objective of the Company is to be a leading, full-service,
global Tier 1 supplier of integrated systems based on metal forming and related
manufacturing technologies. Management believes that the Company is well
positioned to benefit from two significant trends in the stamping and metal
forming segments of the automotive industry: outsourcing and consolidation.
Outsourcing of metal stamping has increased in response to competitive pressures
on OEMs to improve quality and reduce capital requirements, labor costs,
overhead and inventory. Consolidation among automotive industry suppliers has
occurred as OEMs have more frequently awarded long-term sole source contracts to
the most capable global suppliers. In addition, OEMs are increasingly seeking
systems suppliers who can provide a complete package of design, engineering,
manufacturing and project management support for an integrated system (such as a
front-end system). The Company intends to capitalize on these trends through
internal development and strategic acquisitions. The key elements of the
Company's strategy include the following:
Provide Full-Service Program Capability. The Company is focused on
developing full-service program capabilities. The Company works with OEMs
throughout the product development process from concept and prototype
development through the design and implementation of manufacturing processes.
The Company's ability to provide the package of design, engineering,
prototyping, tooling, blanking, stamping, assembly, corrosion resistant coating
and custom shipping rack fabrication to its customers creates a unique
capability present in only a limited number of suppliers. The Company believes
this capability will enable it to manage large programs, assist it in reducing
customer program launch time, lower customer costs and increase its margins.
Supply Complex, High Value-Added Systems. As a result of the Company's
technical design and engineering capabilities and its reputation for
highly-efficient manufacturing operations, the Company is able to secure supply
relationships for complex, high value-added products, primarily assemblies and
modules that contain multiple stamped parts and various welded, hemmed or
fastened components. For example, the Company produces the rear door for GM's
Yukon/Tahoe/Suburban vehicles, the lower control arm for GM's four wheel drive
C/K vehicles, the radiator support assembly for GM's W-car (Grand Prix, Century,
Lumina,
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Monte Carlo and Intrigue) and complex A-pillar assemblies for the Ford Mustang
and the Ford Ranger pickup. These complex products typically generate higher
dollar content per vehicle, as well as higher margins for the Company as
compared to simple, individual stampings. The Company plans to capitalize on its
ability to develop and provide integrated modules and assemblies to deliver to
the OEMs an integrated product, such as a complete door or front-end system. In
addition to doors, radiator supports, and Class A surface components, the
Company has unique expertise with respect to control arms, which will be further
developed as a component part of the entire drive control system.
Focus on High Growth Vehicle Categories. The Company's sales and marketing
efforts have been, and will continue to be, directed toward sectors of the
automotive market that have experienced strong consumer demand. For the fiscal
year ended March 31, 1997, approximately 72.0% of the Company's net sales on a
pro forma basis for the acquisition of Lobdell were derived from sales of
products manufactured for SUVs, mini-vans, vans and light trucks. The SUV market
alone has been the fastest growing segment in the North American new automotive
sales market with 1991 to 1996 vehicle production growth at a CAGR of
approximately 18.3%. Similarly, the Company's sales to the passenger car market
have been, and will continue to be, directed to the segments with stronger sales
growth, including Saturn cars. For example, the growth in vehicle production in
the passenger car sector has been flat during the past five years while
production of Saturn cars grew from 1992 to 1996 at a CAGR of approximately
9.2%.
Establish a Global Presence. The Company is actively pursuing strategic
acquisitions and joint-venture opportunities in Europe and intends to pursue
opportunities which will allow the Company to establish a presence in South
America, Asia and other markets in order to serve its customers on a global
basis. Several OEMs have announced certain models designed for the world
automobile market ("World Car"). As a result, the OEMs have encouraged their
existing suppliers to establish foreign production support for World Car
programs. This globalization provides access to new customers and technology, as
well as economic cycle diversification. At the request of GM de Mexico, the
Company is in the process of establishing a presence in Mexico. In 1997, the
Company will begin manufacturing and assembling components for business recently
awarded by GM de Mexico.
Pursue Strategic Acquisitions. In response to the trend in the OEM market
toward "systems suppliers," the Company is focused on making strategic
acquisitions that will enhance the Company's ability to provide integrated
systems (such as a door or front end system) or otherwise leverage its existing
business by providing additional product, manufacturing and service
capabilities. The Company also intends to pursue acquisitions which will expand
its customer base by providing an entree to new customers, including the North
American operations of Asian and European based OEMs. Consistent with this
strategy, the pending acquisition of Howell (as described below) provides an
entree to Chrysler Corporation ("Chrysler"). The Company believes that the
continuing supplier consolidation in the stamping and metal forming segments may
also provide attractive opportunities to acquire high-quality companies at
favorable prices, including businesses which can be improved financially through
overhead elimination, organizational restructuring, plant reconfiguration, labor
contract negotiations and management changes. The Company will also pursue
acquisitions that enable it to achieve a global presence.
RECENT DEVELOPMENTS
On May 21, 1997, the Company signed a definitive Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which it will acquire Howell (the
"Merger"). Howell is a Tier 1 manufacturer of high-quality welded subassemblies
and detailed stampings used primarily in suspension system applications in the
production of SUVs, light trucks, mini-vans, vans and passenger cars. Pursuant
to the Merger Agreement, the shareholders of Howell will receive approximately
$23.4 million in cash. The Company also executed a shareholder agreement
pursuant to which it has received from the principal shareholder an option to
purchase its shares (the "Shares"), which constitute approximately 32.6% of the
issued and outstanding shares of common stock of Howell, at any time prior to
December 31, 1997, together with such shareholder's agreement to vote all such
Shares in favor of the Merger.
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For the nine months ended April 30, 1997, Howell had net sales of $72.4
million and Adjusted EBITDA of $4.2 million. Howell's net sales have grown from
$39.4 million for the fiscal year ended July 31, 1992 to $79.2 million for the
fiscal year ended July 31, 1996. On a pro forma basis for the fiscal year ended
March 31, 1997, assuming the acquisitions of Lobdell and Howell had occurred on
April 1, 1996, net sales and Adjusted EBITDA for the Company would have been
$421.7 million and $31.7 million, respectively.
The acquisition of Howell is consistent with the strategic objectives of
the Company. Howell has a significant relationship with Chrysler and has
developed a niche in designing, engineering and manufacturing suspension control
arms in a variety of configurations and variations depending on drive-train and
suspension application. Approximately 54.0% of Howell's net sales for the nine
months ended April 30, 1997, were derived from products used in the control arm
suspension applications. On a pro forma basis, assuming the acquisitions of
Lobdell and Howell had occurred on April 1, 1996, the Company would have derived
approximately 23.0% of its net sales from control arm applications for fiscal
1997.
Howell's expertise in this area is complementary to the Company's and will
enhance its ability to develop key suspension system components. Further,
Howell's sales are principally in the high-growth vehicle categories of SUVs,
light trucks, mini-vans and vans, the same market targeted by the Company. The
acquisition of Howell also provides the Company with an entree to Chrysler and
will strengthen the Company's existing relationship with Ford. Sales to Chrysler
and Ford represented 47.0% and 53.0%, respectively, of Howell's net sales for
the nine months ended April 30, 1997. On a pro forma basis for fiscal 1997,
assuming the acquisitions of Lobdell and Howell had occurred on April 1, 1996,
(i) the SUV, mini-van, van and light truck segment represented approximately
75.0% of net sales and (ii) the Company's net sales by major customers would
have been approximately as follows: GM 44.0%; Ford 37.0%; Chrysler 11.0%; CAMI
2.0%, and Saturn 2.0%.
Howell's two manufacturing facilities, located in Masury, Ohio and Lapeer,
Michigan, have received Chrysler's Gold Pentastar Award for the 1996 model year
and Ford's Q1 rating. In addition, Howell has achieved certification as a
registrant under the QS-9000 program at its Lapeer facility and its
headquarters.
The Company expects that the transaction with Howell will be consummated in
the second quarter of fiscal 1998, subject to the satisfaction of standard
closing conditions.
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THE EXCHANGE OFFER
Securities Offered............ Up to $125,000,000 aggregate principal amount
of 10 1/8% Senior Subordinated Notes Due 2007
(the "New Notes"). The terms of the New Notes
and Old Notes (collectively, the "Notes") are
identical in all material respects, except for
certain transfer restrictions, registration
rights and certain interest rate step-up
provisions relating to the Old Notes.
The Exchange Offer............ The New Notes are being offered in exchange for
a like principal amount of Old Notes. Old Notes
may be exchanged only in integral multiples of
$1,000. The issuance of the New Notes is
intended to satisfy obligations of the Company
and the Subsidiary Guarantors contained in the
Registration Agreement.
Expiration Date; Withdrawal
of Tender................... The Exchange Offer will expire at 5:00 p.m. New
York City time, on , 1997, or such
later date and time to which it may be extended
by the Company. The tender of Old Notes
pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. Any
Old Notes not accepted for exchange for any
reason will be returned without expense to the
tendering holder thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer. See "The Exchange
Offer -- Terms of the Exchange Offer; Period
for Tendering Old Notes" and "-- Withdrawal
Rights."
Certain Conditions to the
Exchange Offer................ The Company's obligation to accept for
exchange, or to issue New Notes in exchange
for, any Old Notes is subject to certain
customary conditions relating to compliance
with any applicable law, or order of any
governmental agency or any applicable
interpretation by the Staff of the Commission,
which may be waived by the Company in its
reasonable discretion. The Company currently
expects that each of the conditions will be
satisfied and that no waivers will be
necessary. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer."
Procedures for Tendering Old
Notes......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with such Old Notes and any
other required documentation, to the Exchange
Agent (as defined) at the address set forth
herein. See "The Exchange Offer -- Procedures
for Tendering Old Notes."
Special Procedures for
Beneficial Owners............. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Old Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering his or her
Old Notes,
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either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time and may not be completed
prior to the Expiration Date.
Guaranteed Delivery
Procedures.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent, prior to the
Expiration Date, must tender their Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures."
Use of Proceeds............... There will be no proceeds to the Company from
the exchange of Notes pursuant to the Exchange
Offer.
Exchange Agent................ First Trust National Association, is serving as
the Exchange Agent in connection with the
Exchange Offer.
Federal Income Tax
Consequences.................. The exchange of Notes pursuant to the Exchange
Offer should not be a taxable event for federal
income tax purposes. See "Certain Federal
Income Tax Considerations."
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CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company is of the view that
holders of Old Notes (other than any holder who is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) who exchange their Old
Notes for New Notes pursuant to the Exchange Offer generally may offer such New
Notes for resale, resell such New Notes, and otherwise transfer such New Notes
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided such New Notes are acquired in the ordinary course
of the holders' business and such holders have no arrangement with any person to
participate in a distribution of such New Notes. Any holder who tenders in the
Exchange Offer with the intention or for the purpose of participating in a
distribution of the New Notes cannot rely on such interpretation by the Staff of
the Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Unless an exemption from registration is otherwise available, any
such resale transaction should be covered by an effective registration statement
containing the information required by the Securities Act. This Prospectus may
be used for an offer to resell, resale or other retransfer of New Notes only as
specifically set forth herein. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. See "Plan of Distribution." In addition, to comply with the securities
laws of certain jurisdictions, if applicable, the New Notes may not be offered
or sold unless they have been registered or qualified for sale in such
jurisdiction or in compliance with an available exemption from registration or
qualification. The Company has agreed, pursuant to the Registration Agreement
and subject to certain specified limitations therein, to register or qualify the
New Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Notes reasonably requests in writing. If a
holder of Old Notes does not exchange such Old Notes for New Notes pursuant to
the Exchange Offer, such Old Notes will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the Old
Notes may not be offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. See "The Exchange
Offer -- Consequences of Failure to Exchange; Resales of New Notes."
The Old Notes are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Old Notes
may continue to be traded in the PORTAL market. Following consummation of the
Exchange Offer, the New Notes will not be eligible for PORTAL trading.
THE NEW NOTES
The terms of the New Notes are identical in all material respects to the
Old Notes, except for certain transfer restrictions registration rights and
certain interest rate step-up provisions relating to the Old Notes.
Issuer........................ Oxford Automotive, Inc.
Notes......................... $125.0 million in aggregate principal amount of
10 1/8% Senior Subordinated Notes Due 2007.
Maturity...................... June 15, 2007.
Interest Payment Dates........ Each June 15 and December 15, commencing
December 15, 1997.
Subsidiary Guaranties......... Like the Old Notes, the New Notes will be
guaranteed on a senior subordinated basis by
each Restricted Subsidiary of the Company
(other than certain foreign subsidiaries) that
is an obligor or guarantor of any Bank Credit
Agreement (the "Subsidiary Guaranties"). See
"Description of the Notes -- Subsidiary
Guaranties.".
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Subordination of Notes and
Subsidiary Guaranties......... Like the Old Notes, the New Notes and the
Subsidiary Guaranties will be general unsecured
senior subordinated obligations of the Company
and the Subsidiary Guarantors, as applicable.
The New Notes and the Subsidiary Guaranties
will be subordinated in right of payment to the
prior payment in full of all existing and
future Senior Indebtedness (as defined) and
will rank pari passu with or senior to all
present and future subordinated indebtedness of
the Company or the relevant Subsidiary
Guarantors, as applicable. As of March 31,
1997, on a pro forma basis after giving effect
to the Offering and the Exchange Offer and the
application of the net proceeds thereof, the
Company would have had no outstanding Senior
Indebtedness and the Subsidiary Guarantors'
outstanding Senior Indebtedness would have been
approximately $16.7 million. See "Description
of the Notes -- Subordination."
Sinking Fund.................. None.
Optional Redemption........... Like the Old Notes, the New Notes will be
redeemable at the option of the Company, in
whole or in part at any time on or after June
15, 2002, at the redemption prices set forth
herein plus accrued and unpaid interest, if
any, to the redemption date. In addition, at
any time prior to June 15, 2000, the Company
may redeem, at its option, up to an aggregate
amount of 35% of the original principal amount
of the Notes with the proceeds of one or more
Public Equity Offerings following which there
is a Public Market at a redemption price of
110.125% of the principal amount thereof plus
accrued and unpaid interest, if any, to the
redemption date, provided that at least 65% of
the original aggregate principal amount of the
Notes remains outstanding after each such
redemption. See "Description of the Notes --
Optional Redemption."
Change of Control............. Upon the occurrence of a Change of Control,
each Holder of Notes will have the right to
require the Company to purchase all or a
portion of such Holder's Notes at a price in
cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid
interest, if any, to the date of purchase. In
the event of a Change of Control, there can be
no assurance that the Company will have the
financial resources or be permitted under the
terms of its other indebtedness to repurchase
or redeem the Notes. See "Description of the
Notes -- Change of Control."
Certain Covenants............. The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries to (i)
incur additional indebtedness, (ii) pay
dividends or make other distributions with
respect to Capital Stock (as defined) of the
Company and its Restricted Subsidiaries, (iii)
create certain liens, (iv) sell material assets
of the Company or its Restricted Subsidiaries,
(v) enter into certain mergers and
consolidations and (vi) make capital
expenditures. See "Description of the Notes --
Certain Covenants."
Risk Factors.................. See "Risk Factors" for a discussion of certain
factors that should be considered in connection
with the Exchange Offer.
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SENIOR CREDIT FACILITY
On June 24, 1997, concurrently with the Offering, the Company entered into
a credit agreement with NBD Bank, on behalf of itself and as agent for a
syndicate of other lenders, pursuant to which availability under such facility
is $110.0 million (such credit facility being referred to herein as the "Senior
Credit Facility"). The facility is in the form of a revolving credit line.
Availability under the revolver at March 31, 1997 would have been approximately
$101.0 million, reduced for the effect of a Letter of Credit issued for the IRBs
(as defined). The obligations under the Senior Credit Facility are secured by
substantially all the assets of the Subsidiary Guarantors and the Company.
As of March 31, 1997, on a pro forma basis after giving effect to the
Offering, there would have been no borrowings under the Senior Credit Facility.
See "Capitalization" and "Description of Certain Indebtedness and Preferred
Stock."
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SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth (i) summary historical financial data of BMG
(the "Predecessor") for the year ended March 31, 1995 and the period from April
1, 1995 through October 27, 1995, (ii) summary historical financial data of the
Company from October 28, 1995 through March 31, 1996 and for the year ended
March 31, 1997, and (iii) summary pro forma financial data for the year ended
March 31, 1997. The summary historical financial data for the year ended March
31, 1995, the period April 1, 1995 through October 27, 1995 and the period
October 28, 1995 through March 31, 1996 was derived from the audited
consolidated financial statements of the Predecessor and the Company, which are
included elsewhere in this Prospectus, together with the report of Deloitte &
Touche, independent accountants. The summary historical financial data for the
year ended March 31, 1997 was derived from the audited consolidated financial
statements of the Company, which are included elsewhere in this Prospectus,
together with the report of Price Waterhouse LLP, independent accountants. The
summary pro forma statement of operations data and other financial data for the
fiscal year ended March 31, 1997 were prepared to illustrate the effect of the
Offering, the acquisitions of Lobdell and Howell and the Exchange Offer, as if
each had occurred on April 1, 1996. The summary pro forma balance sheet data at
March 31, 1997 was prepared to illustrate the effect of the Offering, the
acquisition of Howell and the Exchange Offer as if each had occurred on March
31, 1997. The pro forma data does not purport to be indicative of the results of
operations or the financial position of the Company that would have been
obtained if the acquisitions, the Offering and the Exchange Offer had in fact
been completed as of such dates or to project the results of operations or the
financial position of the Company for any future date or period. The following
table should be read in conjunction with the "Selected Consolidated Historical
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Pro Forma Combined Financial Data," and the
Consolidated Financial Statements of the Company and the related notes and other
financial information presented elsewhere in this Prospectus.
HISTORICAL PRO FORMA
----------------------------------------------------------------- -----------
PREDECESSOR COMPANY
----------------------------- -----------------------------------------------
FISCAL YEAR PERIOD PERIOD FISCAL YEAR FISCAL YEAR
ENDED APRIL 1, 1995- OCTOBER 28, 1995- ENDED ENDED
MARCH 31, OCTOBER 27, MARCH 31, MARCH 31, MARCH 31,
1995 1995 1996 1997 1997
----------- -------------- ----------------- ----------- -----------
AUDITED AUDITED AUDITED AUDITED (UNAUDITED)
(DOLLARS IN THOUSANDS)
Statement of Operations Data:
Net sales............................. $75,097 $49,043 $35,572 $136,861 $421,707
Gross profit.......................... 4,206 2,148 3,948 11,773 30,269
Equipment impairment and non-recurring
charges(a).......................... -- -- -- 287 5,247
Operating income (loss)............... (348) (1,774) 1,713 3,801 3,591
Interest expense...................... 1,267 1,048 1,096 3,388 13,758
Other income (expense)................ -- -- -- 2,201 3,274
Income (loss) before income taxes..... (1,615) (2,822) 617 2,614 (6,893)
Provision (benefit) for income
taxes............................... (349) (938) 202 1,065 (2,437)
Net income (loss)..................... $(1,266) $(1,884) $ 415 $ 1,549 $ (4,456)
Balance Sheet Data (end of period):
Cash and cash equivalents............. -- -- -- $ 9,671 $ 24,370
Trade accounts receivable, net........ $ 9,835 $13,312 $ 8,338 47,626 61,841
Inventories........................... 4,170 4,429 3,719 13,411 20,681
Total assets.......................... 41,523 59,770 49,200 246,461 309,118
Total debt............................ 12,907 23,233 26,758 99,829 141,524
Redeemable preferred stock............ -- -- -- 39,300 39,300
Total shareholders' equity............ 10,833 9,329 935(b) 2,341 2,341
Financial Ratios and Other Data:
Depreciation and amortization......... $ 1,413 $ 919 $ 687 $ 5,041 $ 19,563
Capital expenditures.................. 4,384 5,111 3,466 3,326 19,674
Adjusted EBITDA(c).................... 1,065 (855) 2,400 11,330 31,675
Gross margin(d)....................... 5.60% 4.38% 11.10% 8.60% 7.18%
Adjusted EBITDA margin(e)............. 1.42 NM 6.75 8.28 7.51
Ratio of Adjusted EBITDA to interest
expense(f).......................... 2.3x
Ratio of net debt to Adjusted
EBITDA(g)........................... 3.6
See Notes to Summary Consolidated Historical and Pro Forma Financial Data on the
following page.
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- -------------------------
(a) The provision for equipment impairment and non-recurring charges includes:
(i) on a pro forma basis, for the year ended March 31, 1997, a $3.0 million
impairment reserve against certain long-lived assets of Laserweld
International L.L.C. ("Laserweld") a wholly owned indirect subsidiary of the
Company, a $0.5 million provision for liability under the WARN Act, $0.5
million of excess legal and professional fees associated with the marketing
and sale of Lobdell and $1.2 million related to the loss before income taxes
for the discontinuance of the Laserweld and Parallel Group International
("Parallel") operations and (ii) for the year ended March 31, 1997, the loss
before income taxes for the discontinuance of the Laserweld and Parallel
operations of $0.3 million. Management does not anticipate that these costs
will be a part of future operations.
(b) The reduction in equity of $8.4 million from the period ended October 27,
1995 to the period ended March 31, 1996 is primarily a result of the
elimination of Predecessor equity as a part of the purchase accounting
adjustments made upon the acquisition of the Predecessor.
(c) Adjusted EBITDA is defined as income (loss) before interest, income taxes,
depreciation and amortization and equipment impairment and non-recurring
charges. For the fiscal year ended March 31, 1997, equipment impairment and
non-recurring charges aggregated $0.3 million and on a pro forma basis, for
the fiscal year ended March 31, 1997, equipment impairment and non-recurring
charges aggregated $5.2 million, as described in Note (a) above. Adjusted
EBITDA should not be construed as a substitute for income from operations,
net income or cash flow from operating activities for the purpose of
analyzing the Company's operating performance, financial position and cash
flows.
(d) Gross margin is defined as gross profit as a percent of net sales for each
of the applicable periods.
(e) Adjusted EBITDA margin is defined as Adjusted EBITDA as a percent of net
sales for each of the applicable periods.
(f) Defined as the ratio of Adjusted EBITDA to total interest expense.
(g) Defined as the ratio of net debt to Adjusted EBITDA with net debt consisting
of total debt less cash and cash equivalents and unexpended bond proceeds.
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RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act, as amended. Discussions containing such
forward-looking statements may be found in the material set forth under
"Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," as well as within the Prospectus
generally. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
the matters set forth in the Prospectus generally. The Company cautions the
reader, however, that this list of factors may not be exhaustive. In evaluating
the Exchange Offer, Holders of the Old Notes should carefully consider the
following risk factors, as well as the other information set forth elsewhere in
this Prospectus. The risk factors set forth below are generally applicable to
the Old Notes as well as the New Notes.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
The Company has, and upon consummation of the Exchange Offer will have,
indebtedness which is substantial in relation to the shareholders' equity, as
well as interest and debt service requirements which are significant compared to
its cash flow from operations. After adjusting for the Offering, the Senior
Credit Facility and the application of the net proceeds therefrom and the
Exchange Offer, at March 31, 1997, the Company's total indebtedness would have
been $141.5 million (exclusive of unused commitments under the Senior Credit
Facility of approximately $101.0 million) and the Company would have had $39.3
million of preferred stock and $2.3 million of common shareholders' equity. The
degree to which the Company is leveraged could have important consequences to
Holders of the Notes, including the following: (i) the Company's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions or general corporate purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of interest on the Notes and its other existing indebtedness, thereby
reducing the funds available to the Company for other purposes; (iii) the
agreements governing the Company's long-term indebtedness contain certain
restrictive financial and operating covenants; (iv) certain indebtedness under
the Senior Credit Facility will be at variable rates of interest, which will
cause the Company to be vulnerable to increases in interest rates; (v) all of
the indebtedness outstanding under the Senior Credit Facility is secured by
substantially all the assets of the Subsidiary Guarantors and the Company and
will become due prior to the time the principal on the Notes will become due;
(vi) the Company may be hindered in its ability to adjust rapidly to changing
market conditions; and (vii) the Company's substantial degree of leverage could
make it more vulnerable in the event of a downturn in general economic
conditions or in its business. The Indenture permits the Company and the
Subsidiary Guarantors to incur additional indebtedness, including Senior
Indebtedness and indebtedness that will rank pari passu with the Notes.
The Company's ability to pay interest on the Notes and to satisfy its other
obligations will depend upon its future operating performance, which will be
affected by prevailing economic conditions and financial, business and other
factors, many of which are beyond its control. The Company anticipates that its
operating cash flow, together with available borrowings under the Senior Credit
Facility, will be sufficient to meet its operating expenses, to service interest
requirements on its debt obligations as they become due and to implement its
business strategy. There can be no assurance, however, that the Company's
business will generate sufficient cash flow from operations or that future
borrowings will be available in an amount sufficient to enable the Company to
service its indebtedness, including the Notes, to make anticipated capital
expenditures or to implement its business strategy. Further, the Company is
required to redeem the Lobdell Preferred Stock (as defined) prior to the time
the principal on the Notes will become due. For fiscal 1995, the Company's
earnings were insufficient to cover fixed charges by $1.6 million. For the
period April 1, 1995 to October 27, 1995, the Company's earnings were
insufficient to cover fixed charges by $2.8 million. For fiscal 1997, the
Company's earnings exceeded fixed charges by $2.6 million; however, on a pro
forma basis for fiscal 1997, earnings were insufficient to cover fixed charges
by $4.9 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity, Capital Resources and
Financial Condition" and "Description of Certain Indebtedness and Preferred
Stock."
The Senior Credit Facility contains certain customary covenants, including
without limitation, reporting and other affirmative covenants; financial
covenants, including ratio of total debt to EBITDA, net worth, fixed
14
17
charge coverage ratio, interest coverage ratio (each as defined in and
calculated pursuant to the Senior Credit Facility); and negative covenants,
including restrictions on incurrence of other indebtedness, payment of cash
dividends and other distributions to shareholders, liens in favor of parties
other than the lenders under the Senior Credit Facility, certain guaranties of
obligations of or advances to others, sales of material assets not in the
ordinary course of business, restrictions on mergers and acquisitions, and
capital expenditures. There can be no assurance that these requirements will be
met in the future. If they are not, the holders of the indebtedness under the
Senior Credit Facility would be entitled to declare such indebtedness
immediately due and payable or, if the Company were unable to repay such
indebtedness, the holders thereunder could proceed against the collateral
securing the Senior Credit Facility, which consists of substantially all of the
assets of the Company and the Subsidiary Guarantors. See "Description of Certain
Indebtedness and Preferred Stock -- Senior Credit Facility."
SUBORDINATION OF NOTES AND THE SUBSIDIARY GUARANTIES; ASSET ENCUMBRANCES;
HOLDING COMPANY STRUCTURE
Like the Old Notes, the New Notes will be subordinated in right of payment
to all present and future Senior Indebtedness of the Company and the Subsidiary
Guarantors, including the principal, premium (if any) and interest with respect
to the obligations outstanding under the Senior Credit Facility. In addition,
the Subsidiary Guaranties will be subordinated in right of payment to all
existing and future Senior Indebtedness of the Subsidiary Guarantors. As of
March 31, 1997, on a pro forma basis, after adjusting for the Offering
(including the application of net proceeds therefrom) and the Exchange Offer,
the Company would not have had any Senior Indebtedness outstanding (excluding
unused commitments under the Senior Credit Facility) and the Subsidiary
Guarantors would have had approximately $16.7 million of Senior Indebtedness
outstanding. Consequently, in the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding with respect to the Company or
any Subsidiary Guarantor, assets of the Company or such Subsidiary Guarantor
will be available to pay obligations of the Notes only after all Senior
Indebtedness of the Company or such Subsidiary Guarantor has been paid in full,
and there can be no assurance that there will be sufficient assets to pay
amounts due on all or any of the Notes. See "Description of the Notes --
Subordination."
Like the Old Notes, the New Notes are unsecured and will be effectively
subordinated to any secured indebtedness of the Company or any Subsidiary
Guarantor. The indebtedness outstanding under the Senior Credit Facility will be
secured by liens on substantially all of the assets of the Subsidiary Guarantors
and the Company. The ability of the Company to comply with the provisions of the
Senior Credit Facility may be affected by events beyond the Company's control.
The breach of any such provisions could result in a default under the Senior
Credit Facility, in which case, depending upon the actions taken by the lenders
thereunder or their successors or assignees, such lenders could elect to declare
all amounts borrowed under the Senior Credit Facility, together with accrued
interest, to be due and payable, and the Company could be prohibited from making
payments of interest and principal on the Notes until the default is cured or
all Senior Indebtedness is paid or satisfied in full. If the Company were unable
to repay such borrowings, such lenders could proceed against the collateral. If
the indebtedness under the Senior Credit Facility were accelerated, there can be
no assurance that the assets of the Company and the Subsidiary Guarantors would
be sufficient to repay in full such indebtedness and the other indebtedness of
the Company, including the Notes. See "Description of Certain Indebtedness and
Preferred Stock -- Senior Credit Facility" and "Description of the Notes --
Subordination."
The Company is a holding company which derives all of its operating income
from its subsidiaries. The Holders of the Notes will have no direct claim
against such subsidiaries other than the claim created by the Subsidiary
Guaranties, which may be subject to legal challenge in the event of the
bankruptcy of a subsidiary. See "Risk Factors -- Fraudulent Conveyance." If such
a challenge were upheld with respect to any such Subsidiary Guarantee, such
Subsidiary Guarantee would be invalidated and unenforceable. To the extent that
the Subsidiary Guarantee is not enforceable, the rights of Holders of the Notes
to participate in any distribution of assets of the Subsidiary Guarantor upon
liquidation, bankruptcy, reorganization or otherwise may, as is the case with
other unsecured creditors of the Company, be subject to prior claims of
creditors of
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that Subsidiary Guarantor. The Company must rely on dividends and other payments
from its subsidiaries to generate the funds necessary to meet its obligations,
including the payment of principal and interest on the Notes. The Indenture
contains covenants that restrict the ability of the Company's subsidiaries to
enter into any agreement limiting distributions and transfers, including
dividends to the Company. Further, the ability of the Company's subsidiaries to
pay dividends and make other payments are, and may in the future be, subject to
certain statutory, contractual and other restrictions. See "Description of
Certain Indebtedness and Preferred Stock."
CYCLICALITY; THE OEM SUPPLIER INDUSTRY
The OEM supplier industry is highly cyclical and, in large part, impacted
by the strength of the economy generally, by prevailing interest rates and by
other factors which may have an effect on the level of sales of automotive
vehicles. There can be no assurance that the automotive industry for which the
Company supplies components will not experience downturns in the future. An
economic recession may impact substantially leveraged companies, such as the
Company, more than similarly situated companies with less leverage. A decrease
in overall consumer demand for SUVs, light trucks, mini-vans, vans or passenger
cars could have a material adverse effect on the Company's financial condition
and results of operations.
The automotive industry is characterized by a small number of OEMs that are
able to exert considerable pressure on component and system suppliers to reduce
costs, improve quality and provide additional design and engineering
capabilities. In the past, OEMs have generally demanded and received price
reductions and measurable increases in quality by implementing competitive
selection processes, rating programs and various other arrangements. Also,
through increased partnering on platform work, OEMs have generally required
component and system suppliers to provide more design engineering input at
earlier stages of the product development process, the costs of which have, in
some cases, been absorbed by the suppliers. Although the Company, historically,
has regained the loss caused by price reductions to the OEMs through cost
reduction initiatives and assistance from the OEMs, there can be no assurance
that future price reductions, increased quality standards or additional
engineering capabilities required by OEMs will not have a material adverse
effect on the financial condition or results of operations of the Company.
Further, although the general trend of the OEMs is to outsource component
manufacturing, the OEMs have, from time to time, brought their stamping work
back in-house. There can be no assurance that the OEMs may not in-source some of
the jobs currently performed by the Company.
Many OEMs and their Tier 1 suppliers are unionized. Work stoppages and
slowdowns experienced by OEMs and their Tier 1 suppliers, as a result of labor
disputes, could have a material adverse effect on the Company's financial
condition or results of operations.
DEPENDENCE ON PRINCIPAL CUSTOMERS
Substantially all of the Company's sales for fiscal 1997 were to GM and
Ford. Although the Company has ongoing supply relationships with its principal
customers and is a long-term supplier to GM and Ford, there can be no assurance
that sales to GM and Ford will continue at the same level. Furthermore,
continuation of these relationships is dependent upon the customers'
satisfaction with the price, quality and delivery of the Company's products. In
addition, the Company's agreements to produce parts are assigned to specific
models or product lines of its customers. Accordingly, the Company's business,
and estimates for future business, are dependent upon consumer demand for the
specific models and product lines that incorporate the Company's parts. The
Company's arrangements with the OEMs are typically in the form of purchase
orders that may be canceled by the OEMs. However, the Company believes that
cancellation of purchase orders is rare, due, in part, to the OEM production
interruptions likely to be caused by changing suppliers. A significant decrease
in sales of vehicles using the Company's products or the loss by the Company of
the right to supply any of such products to its customers would have a material
adverse effect on the Company's financial condition and results of operations.
The loss of either GM or Ford as a customer would have a material adverse effect
on the Company. In addition, the delay or cancellation of material orders from,
or design, development, delivery or product projects at, GM or Ford could have a
material adverse effect on the Company.
16
19
UNIONIZED WORKFORCE
Substantially all employees of the Company are covered by collective
bargaining agreements with either the International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America ("UAW") or the National
Automobile Aerospace, Transportation and General Workers Union of Canada
("CAW"). The Company has not experienced any work stoppages in the last ten
years and considers its relationship with its employees to be good. Strikes or
work stoppages and the resultant adverse impact on its relationship with the
OEMs could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's agreement with the CAW at the
Cambridge, Ontario facility will expire on September 30, 1997 and the Company's
agreement with the UAW at the Argos, Indiana facility will expire on March 31,
1998. While the outcome, including the terms of the new contracts and their
impact on the future results of the Company's operations cannot be predicted,
management does not believe that the financial terms of the new contracts will
have a material adverse effect on the Company. However, there can be no
assurance that the Company will be successful in its contract negotiations.
FRAUDULENT CONVEYANCE
If a court in a lawsuit brought by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy or the Company as a
debtor-in-possession, were to find under relevant federal or state fraudulent
conveyance statutes that the Company did not receive fair consideration or
reasonably equivalent value for incurring the indebtedness, including the Notes,
and that, at the time of such incurrence, the Company (i) was insolvent, (ii)
was rendered insolvent by reason of such incurrence or grant, (iii) was engaged
in a business or transaction for which the assets remaining with the Company
constituted unreasonably small capital or (iv) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they matured,
then such court, subject to applicable statutes of limitation, could void the
Company's obligations under the Notes, recover payments made under the Notes,
subordinate the Notes to other indebtedness of the Company or take other action
detrimental to the Holders of the Notes.
The measure of insolvency for these purposes will depend upon the governing
law of the relevant jurisdiction. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than the fair value of all of that company's property or if the present
fair salable value of that company's assets is less than the amount that will be
required to pay its probable liability on its existing debts as they become
absolute and matured or if the Company is not able to pay its debts as they
become due. Moreover, regardless of solvency, a court could void an incurrence
of indebtedness, including the Notes, if it determined that such transaction was
made with the intent to hinder, delay or defraud creditors. In addition, a court
could subordinate the indebtedness, including the Notes, to the claims of all
existing and future creditors on similar grounds. The Company believes that,
after giving effect to the Offering, the Company (i) has not been rendered
insolvent by the incurrence of indebtedness in connection with the Offering,
(ii) is in possession of sufficient capital to run its business effectively and
(iii) is incurring debts within its ability to pay as the same mature or become
due.
There can be no assurance as to what standard a court would apply in order
to determine whether the Company was "insolvent" upon the sale of the Old Notes
or that, regardless of the method of valuation, a court would not determine that
the Company was insolvent upon consummation of the sale of the Old Notes.
In addition, the Subsidiary Guaranties may be subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit brought by or on behalf of
creditors of any of the Subsidiary Guarantors. In such a case, the analysis set
forth above would generally apply, except that the Subsidiary Guaranties could
also be subject to the claim that, since the Subsidiary Guaranties were incurred
for the benefit of the Company (and only indirectly for the benefit of the
Subsidiary Guarantors), the obligations of the Subsidiary Guarantors thereunder
were incurred for less than reasonably equivalent value or fair consideration. A
court could void the Subsidiary Guarantors' obligation under the Subsidiary
Guaranties, recover payments made under the Subsidiary Guaranties, subordinate
the Subsidiary Guaranties to other indebtedness of a Subsidiary Guarantor or
take other action detrimental to the Holders of the Notes.
17
20
CONTROL BY PRINCIPAL SHAREHOLDER
Selwyn Isakow (the "Principal Shareholder") beneficially owns 48.9% of the
Company's outstanding shares and exercises voting control over those shares not
owned by him, including shares held by the directors and officers of the
Company. Circumstances may occur in which the interests of the Principal
Shareholder could be in conflict with the interests of the Holders of the Notes.
For example, if the Company encounters financial difficulties or is unable to
pay certain of its debts as they mature, the interests of the Principal
Shareholder might conflict with those of the Holders of the Notes. In addition,
the Principal Shareholder may have an interest in pursuing acquisitions,
divestitures or other transactions that, in his judgment, could enhance his
equity investment, even though such transactions might involve risks to the
Holders of the Notes. See "Principal Shareholders."
RISK RELATING TO ACQUISITIONS
To expand its markets and take advantage of the consolidation trend in the
automotive parts industry, the Company's business strategy includes growth
through acquisitions. The ability of the Company to successfully implement its
acquisition strategy depends upon a number of factors. There can be no assurance
that the Company will be able to consummate acquisitions in the future on terms
acceptable to the Company or to integrate any new acquisitions (including
Howell) successfully into its operations and achieve cost savings from such
integration. In addition, the Company is pursuing acquisitions and strategic
alliances in Europe and intends to pursue such acquisitions and alliances in
South America, Asia and other markets. The Company is also continually
investigating opportunities for domestic acquisitions of other OEM suppliers.
There can be no assurance that these acquisitions or strategic alliances will be
successful. See "Risk Factors -- Substantial Leverage and Debt Service
Obligations," and "Business -- Business Strategy."
COMPETITION
The motor vehicle parts industry in which the Company operates is
fragmented and competitive. The Company's competitors include divisions or
subsidiaries of companies that are larger and have substantially greater
resources than the Company as well as divisions of OEMs with internal stamping
and assembly operations. There can be no assurance that the Company's products
will be able to compete successfully with those of its competitors. See
"Business -- Competition."
ENVIRONMENTAL RISKS
The Company's operations and properties are subject to federal, state,
local and foreign laws, regulations and ordinances relating to the use, storage,
handling, generation, treatment, emission, release, discharge and disposal of
certain materials, substances and wastes. In many jurisdictions these laws are
complex and change frequently. Such laws, including but not limited to the
Comprehensive Environmental Response, Compensation & Liability Act ("CERCLA" or
"Superfund") may impose joint and several liability and apply to remediation of
contamination at properties presently or formerly owned or operated by an entity
or its predecessors, as well as to conditions at properties at which wastes or
other contamination attributable to an entity or its predecessors have been sent
or otherwise come to be located. The nature of the Company's operations exposes
it to the risk of liabilities or claims with respect to environmental matters,
including off-site disposal matters, and there can be no assurance that material
costs will not be incurred in connection with such liabilities or claims.
Based upon the Company's experience to date, the Company believes that the
future cost of compliance with existing environmental laws, regulations and
ordinances (or liability for known environmental claims) will not have a
material adverse effect on the Company's business, financial condition and
results of operations. However, future events, such as changes in existing laws
and regulations or their interpretation, may give rise to additional compliance
costs or liabilities that could have a material adverse effect on the Company's
business, financial condition and results of operations. Compliance with more
stringent laws or regulations, as well as more vigorous enforcement policies of
regulatory agencies or stricter or different
18
21
interpretations of existing laws, may require additional expenditures by the
Company that may be material. See "Business -- Regulatory Matters."
CHANGE OF CONTROL
Upon a Change of Control, each Holder of the Notes will have the right to
require the Company to repurchase all or any part of such Notes at a price equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase. The occurrence of a Change of Control may
constitute a default under the Senior Credit Facility. In addition, the Senior
Credit Facility will prohibit the purchase of the Notes by the Company in the
event of a default thereunder, unless and until such time as the indebtedness
under the Senior Credit Facility is repaid in full. The Company's failure to
purchase the Notes would result in a default under the Indenture. The inability
to repay the indebtedness under the Senior Credit Facility, if accelerated,
would also constitute an event of default under the Indenture, which could have
adverse consequences for the Company and the Holders of the Notes. In the event
of a Change of Control, there can be no assurance the Company would have
sufficient financial resources available to satisfy all of its obligations under
the Senior Credit Facility and the Notes. See "Description of Certain
Indebtedness and Preferred Stock -- Senior Credit Facility."
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemption from, or in
transactions not subject to, the registration requirements of, the Securities
Act and applicable state laws, or pursuant to an exemption therefrom. Subject to
the obligation by the Company to file a shelf registration statement covering
resales of Old Notes in certain limited circumstances, the Company does not
intend to register the Old Notes under the Securities Act and, after
consummation of the Exchange Offer, will not be obligated to do so. In addition,
any holder of Old Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes may be deemed to have received
restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Additionally, as a result of the
Exchange Offer, it is expected that a substantial decrease in the aggregate
principal amount of Old Notes outstanding will occur. As a result, it is
unlikely that a liquid trading market will exist for the Old Notes at any time.
This lack of liquidity will make transactions more difficult and may reduce the
trading price of the Old Notes. See "The Exchange Offer."
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
The New Notes are new securities and there is currently no established
market for the New Notes. Accordingly, there can be no assurance as to the
liquidity of any markets that may develop for the New Notes, the ability of
holders to sell the New Notes or the price at which holders would be able to
sell the New Notes. Future trading prices of the New Notes will depend on many
factors, including, among other things, prevailing interest rates, the Company's
operating results and the market for similar securities. Historically, the
market for securities similar to the New Notes, including non-investment grade
debt, has been subject to disruptions that have caused substantial volatility in
the prices of such securities. There can be no assurance that any market for the
New Notes, if such market develops, will not be subject to similar disruptions.
The Initial Purchasers have advised the Company that they currently intend to
make a market in the New Notes offered hereby. However, the Initial Purchasers
are not obligated to do so and any market making may be discontinued at any time
without notice. The Old Notes currently are eligible for trading by qualified
buyers in the Private Offerings, Resale and Trading through Automated Linkages
(PORTAL) Market. The Company and the Subsidiary Guarantors do not intend to
apply for listing of the New Notes on any national securities exchange or for
their quotation through the National Association of Securities Dealers Automated
Quotation System.
19
22
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's and the
Subsidiary Guarantors' obligations under the Registration Agreement. The Company
will not receive any cash proceeds from the issuance of the New Notes in the
Exchange Offer. In consideration for issuing the New Notes as contemplated in
this Prospectus, the Company will receive Old Notes in like principal amount.
The form and terms of the New Notes are identical in all material respects to
the form and terms of the Old Notes, except for certain transfer restrictions
and registration rights relating to the Old Notes and except for certain
provisions providing for an increase in the interest rate on the Old Notes under
certain circumstances relating to the timing of the Exchange Offer. The Old
Notes surrendered in exchange for the New Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the New Notes will not result in
any increase in the outstanding debt of the Company. The net proceeds to the
Company from the sale of the Old Notes were approximately $120.7 million (after
the deduction of the discount to the Initial Purchasers and estimated expenses
incurred in connection with the Offering and related transactions of
approximately $4.1 million). The Company used approximately $83.1 million of the
net proceeds to refinance existing indebtedness and approximately $22.9 million
in connection with the acquisition of Howell with the remaining $14.7 million
for working capital and general corporate purposes, which may include other
acquisitions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity, Capital Resources and Financial
Condition."
20
23
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 and as adjusted to give effect to the Offering and the
application of the net proceeds thereof, including payments made in connection
with the pending acquisition of Howell and the Exchange Offer. This table should
be read in conjunction with the unaudited "Pro Forma Combined Consolidated
Financial Data," "Selected Consolidated Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes thereto
included elsewhere in this Prospectus. See also "Description of Certain
Indebtedness and Preferred Stock."
MARCH 31, 1997
----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
Cash and cash equivalents................................ $ 9,671 $ 24,370
======== ========
Long-term debt (including current portion):
Existing senior bank credit facilities(a).............. $ 78,823 $ --
Senior Credit Facility(b).............................. -- --
Lewis Emery............................................ 2,833 2,833
Industrial Revenue Bonds............................... 8,300 8,300
Nations Bank -- Tooling................................ 1,380 --
EDC Tooling............................................ 5,110 5,110
Mortgage BMG........................................... 2,475 --
IRDP Loan.............................................. 467 467
Series A Promissory Note............................... 441 --
10 1/8% Senior Subordinated Notes Due 2007............. -- 124,814
-------- --------
Total debt.......................................... 99,829 141,524
-------- --------
Redeemable preferred stock(c)
Series A............................................... 36,012 36,012
Series B............................................... 3,288 3,288
-------- --------
Total redeemable preferred stock.................... 39,300 39,300
-------- --------
Shareholders' equity:
Common stock (400,000 shares authorized; 309,750 issued
and outstanding).................................... 1,050 1,050
Foreign currency translation adjustment................ (28) (28)
Reduction in equity for minimum pension liability...... (253) (253)
Retained earnings...................................... 1,572 1,572
-------- --------
Total shareholders' equity.......................... 2,341 2,341
-------- --------
Total capitalization..................................... $141,470 $183,165
======== ========
- -------------------------
(a) Concurrently with the issuance of the Old Notes, the Company repaid all
outstanding indebtedness under the existing senior bank credit facilities.
(b) Concurrently with the issuance of the Old Notes, the Company entered into
the Senior Credit Facility pursuant to which up to $110.0 million is
available. On a pro forma basis at March 31, 1997, the Company would have
had no borrowings under the Senior Credit Facility and availability on a pro
forma basis at March 31, 1997 would have been approximately $101.0 million.
See "Description of Certain Indebtedness and Preferred Stock."
(c) In connection with the acquisition of Lobdell, redeemable preferred stock
was issued with a face value of $50.7 million, of which $10.0 million was
placed in escrow pending final determination of the purchase price. The
Company and the preferred shareholders of Lobdell have settled certain
claims relating to the acquisition which has resulted in the cancellation of
60,000 shares of Lobdell Series A Preferred Stock and will also entail the
cancellation of up to an additional 40,000 shares of Lobdell Series A
Preferred Stock or, at the election of the preferred shareholders of
Lobdell, 49,938 shares of Lobdell Series B Preferred Stock. See Note 3 of
the "Notes to the Consolidated Financial Statements" for further discussion
regarding the carrying value of the redeemable preferred stock and
additional terms and conditions.
21
24
PRO FORMA COMBINED FINANCIAL DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The unaudited pro forma combined balance sheet as of March 31, 1997 (the
"Unaudited Pro Forma Balance Sheet") gives pro forma effect to the Offering and
the acquisition of Howell as if they had occurred on March 31, 1997. The
acquisition of Howell will be accounted for by the purchase method of accounting
pursuant to which the purchase price is allocated among the acquired tangible
and intangible assets and assumed liabilities in accordance with estimates of
their fair values on the date of acquisition. The pro forma adjustments
represent management's preliminary determination of purchase accounting
adjustments and are based upon available information and certain assumptions
that the Company believes to be reasonable under the circumstances.
Consequently, the amounts reflected in the Unaudited Pro Forma Balance Sheet are
subject to change and the final values may differ substantially from these
amounts. Management does not expect that differences between the preliminary and
final purchase price allocation will have a material impact on the Company's
financial position. The Unaudited Pro Forma Balance Sheet does not purport to be
indicative of the financial position of the Company had such transactions
actually been completed as of the assumed dates and for the periods presented,
or which may be obtained in the future.
The unaudited pro forma combined statement of operations for the year ended
March 31, 1997 (the "Unaudited Pro Forma Statement of Operations") gives pro
forma effect to the Offering and the acquisitions of Lobdell and Howell as if
they had occurred on April 1, 1996 and includes the effect of the following
adjustments as if they were realized during the applicable period: (i)
reductions in cost of sales through labor and fringe benefit reductions, (ii)
reductions in selling, general and administrative labor, professional fees and
other non-recurring items achieved as a direct result of the acquisition of
Lobdell and (iii) net increase in interest expense to reflect the issuance of
the Old Notes. As the acquisition of Howell has not yet been completed, the
Unaudited Pro Forma Statement of Operations does not include any amount for
anticipated savings as a result of cost reductions expected to be implemented by
the Company upon its acquisition of Howell. The Unaudited Pro Forma Statement of
Operations does not purport to be indicative of the results of operations of the
Company had such transactions actually been completed as of the assumed dates
and for the periods presented, or which may be obtained in the future.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF THE PERIOD ENDED
MARCH 31, 1997 APRIL 30, 1997 PRO FORMA PRO FORMA
COMPANY HOWELL(a) ADJUSTMENTS COMBINED
-------------- -------------- ----------- ---------
(DOLLARS IN THOUSANDS)
Cash and cash equivalents.................................. $ 9,671 $ 1,182 $ 13,517(b)(c) $ 24,370
Trade accounts receivable, net............................. 47,626 14,215 -- 61,841
Inventories................................................ 13,411 7,270 -- 20,681
Reimbursable tooling....................................... 4,968 1,678 -- 6,646
Refundable income taxes.................................... 1,641 -- -- 1,641
Prepaid expenses and other current assets.................. 1,354 1,203 (185)(c) 2,372
Deferred income taxes...................................... 4,633 59 875(c) 5,567
-------- ------- -------- --------
Total current assets................................... 83,304 25,607 14,207 123,118
Unexpended bond proceeds................................... 3,937 -- -- 3,937
Deferred income taxes...................................... 5,087 -- -- 5,087
Property, plant and equipment, net......................... 149,545 9,461 6,425(c) 165,431
Goodwill................................................... -- 2,013(c) 2,013
Other noncurrent assets.................................... 4,588 -- 4,944(b)(c) 9,532
-------- ------- -------- --------
Total assets........................................... $246,461 $35,068 $ 27,589 $309,118
======== ======= ======== ========
Trade accounts payable..................................... $ 31,421 $ 9,285 -- $ 40,706
Accrued expenses and other liabilities..................... 14,026 4,631 $ (156)(c) 18,501
Restructuring reserve...................................... 7,050 47 3,519(c) 10,616
Current portion of long-term debt.......................... 24,274 -- (19,875)(b)(d) 4,399
-------- ------- -------- --------
Total current liabilities.............................. 76,771 13,963 (16,512) 74,222
Deferred income taxes...................................... 10,442 124 2,570(c) 13,136
Pension liability.......................................... 3,631 -- 425(c) 4,056
Postretirement medical benefits............................ 33,467 -- -- 33,467
Restructuring reserve...................................... 2,767 120 -- 2,887
Other noncurrent liabilities............................... 2,187 397 -- 2,584
Long-term debt............................................. 75,555 -- 61,570(b)(d) 137,125
-------- ------- -------- --------
Total liabilities...................................... 204,820 14,604 48,053 267,477
Redeemable Series A preferred stock........................ 36,012 -- -- 36,012
Redeemable Series B preferred stock........................ 3,288 -- -- 3,288
-------- ------- -------- --------
Total shareholders' equity............................. 2,341 20,464 (20,464)(c) 2,341
-------- ------- -------- --------
Total liabilities and shareholders' equity............. $246,461 $35,068 $ 27,589 $309,118
======== ======= ======== ========
See accompanying Notes to Unaudited Pro Forma Combined Balance Sheet.
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25
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) Represents the adjustments for the Howell acquisition as if it had occurred
on March 31, 1997. For purposes of the Unaudited Pro Forma Balance Sheet, it
has been assumed that the financial condition of Howell as of April 30, 1997
would have been comparable to that as of March 31, 1997. The April 30, 1997
balance sheet for Howell was derived from Howell's filings with the
Commission under the Exchange Act.
(b) Reflects the estimated sources and uses of funds for the Offering and the
acquisition of Howell as if the acquisition had occurred on March 31, 1997:
Sources of Funds:
Senior Subordinated Notes Due 2007........................ $124,814
========
Use of Funds:
Acquisition of Howell..................................... $ 22,902
Retirement of existing senior bank credit facilities and
other debt (current portion -- $19,875)................ 83,119
Cash...................................................... 14,699
Discount and estimated expenses........................... 4,094
--------
Total Uses............................................. $124,814
========
(c) The acquisition of Howell will be accounted for by the purchase method of
accounting, pursuant to which the purchase price is allocated among the
acquired tangible and intangible assets and assumed liabilities in
accordance with their estimated fair market values on the date of
acquisition. The estimated purchase price and preliminary adjustments to
historical book value of Howell as a result of the transaction are as
follows:
Decrease in cash for payments made at closing............... $ (1,182)
Write off of prepaid assets................................. (185)
Increase in deferred tax asset for restructuring and pension
reserves.................................................. 875
Increase in property plant and equipment to estimated fair
value..................................................... 6,425
Estimated goodwill.......................................... 2,013
Provision for acquisition fees and expenses................. 850
--------
Net increase in assets...................................... $ 8,796
========
Decrease in accrued liabilities............................. $ (156)
Reserve for plant restructuring............................. 3,519
Increase in deferred tax liability.......................... 2,570
Increase in pension reserve................................. 425
Proceeds from Offering used to finance acquisition.......... 22,902
Elimination of retained earnings as a result of purchase
accounting................................................ (20,464)
--------
Net increase in liabilities and shareholders' equity... $ 8,796
========
(d) Pro forma long-term debt (including current portion) is derived by adjusting
actual long-term debt of $99,829 for the addition of $124,814 resulting from
the Offering and the reduction of $83,119 for retirement of existing debt.
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26
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
ADJUSTMENTS FOR LOBDELL ACQUISITION
-------------------------------------------------------------------
PRO FORMA COMPANY
COMPANY(a) LOBDELL(b) ADJUSTMENTS PRO FORMA
-------------- ---------------- -------------- --------------
PERIOD
APRIL 1, 1996
YEAR ENDED THROUGH YEAR ENDED YEAR ENDED
MARCH 31, 1997 JANUARY 10, 1997 MARCH 31, 1997 MARCH 31, 1997
-------------- ---------------- -------------- --------------
(DOLLARS IN THOUSANDS)
Net sales............................... $136,861 $193,303 -- $330,164
Cost of sales........................... 125,088 186,707 $(6,152)(e) 305,643
-------- -------- ------- --------
Gross profit............................ 11,773 6,596 6,152 24,521
Selling, general and administrative..... 7,685 12,398 (3,290)(g) 16,793
Equipment impairment and non-recurring
charges............................... 287 4,960 -- 5,247(i)
-------- -------- ------- --------
Operating Income (loss)................. 3,801 (10,762) 9,442 2,481
Interest expense........................ 3,388 2,729 5,286(j) 11,403
Other Income (expense).................. 2,201 674 -- 2,875
-------- -------- ------- --------
Income (loss) before income taxes....... 2,614 (12,817) 4,156 (6,047)
Provision (benefit) for income taxes.... 1,065 (4,728) 1,663(l) (2,000)
-------- -------- ------- --------
Net income (loss)....................... $ 1,549 $ (8,089) $ 2,493 $ (4,047)
Financial Ratios and Other Data:
Depreciation and amortization........... $ 5,041 $ 11,635 $ 913 $ 17,589
Capital expenditures.................... 3,326 12,862 -- 16,188
Adjusted EBITDA(n)...................... 11,330 6,507 10,355 28,192
Ratio of Adjusted EBITDA to interest
expense(o)............................ 2.5x
Ratio of net debt to Adjusted
EBITDA(p)............................. 3.2
ADJUSTMENTS FOR HOWELL ACQUISITION
-----------------------------------------------------------------
PRO FORMA HOWELL PRO FORMA
HOWELL(c) ADJUSTMENTS PRO FORMA(d) COMBINED
-------------- -------------- -------------- --------------
PERIOD
MAY 1, 1996
THROUGH YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1997 MARCH 31, 1997 MARCH 31, 1997 MARCH 31, 1997
-------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
Net sales............................... $91,543 -- $91,543 $421,707
Cost of sales........................... 85,477 $ 318(f) 85,795 391,438
------- ------- ------- --------
Gross profit............................ 6,066 (318) 5,748 30,269
Selling, general and administrative..... 4,440 198(h) 4,638 21,431
Equipment impairment and non-recurring
charges............................... -- -- -- 5,247
------- ------- ------- --------
Operating Income (loss)................. 1,626 (516) 1,110 3,591
Interest expense........................ 5 2,319(k) 2,324 13,727
Other Income (expense).................. 399 -- 399 3,274
------- ------- ------- --------
Income (loss) before income taxes....... 2,020 (2,835) (815) (6,862)
Provision (benefit) for income taxes.... 710 (1,134)(m) (424) (2,424)
------- ------- ------- --------
Net income (loss)....................... $ 1,310 $(1,701) $ (391) $ (4,438)
Financial Ratios and Other Data:
Depreciation and amortization........... $ 1,458 $ 516 $ 1,974 $ 19,563
Capital expenditures.................... 3,486 -- 3,486 19,674
Adjusted EBITDA(n)...................... 3,483 -- 3,483 31,675
Ratio of Adjusted EBITDA to interest
expense(o)............................ 2.3x
Ratio of net debt to Adjusted
EBITDA(p)............................. 3.6
See accompanying Notes to Unaudited Pro Forma Combined Statement of Operations.
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NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) Statement of Operations Data for the Company for the year ended March 31,
1997 includes operating data for Lobdell for the period subsequent to
acquisition (January 11, 1997 to March 31, 1997).
(b) Statement of Operations Data for Lobdell for the period prior to acquisition
(April 1, 1996 to January 10, 1997).
(c) Represents the adjustments for the Howell acquisition as if it had occurred
on April 1, 1996. For purposes of the Unaudited Pro Forma Statement of
Operations, it has been assumed that the results of operations of Howell for
the twelve months ended April 30, 1997 would have been comparable to the
twelve months ended March 31, 1997. The Statement of Operations Data for the
twelve months ended April 30, 1997 was derived from Howell's filings with
the SEC under the Exchange Act.
(d) As the acquisition of Howell has not been completed, the Unaudited Pro Forma
Statement of Operations does not include any amount of anticipated cost
reductions expected to be implemented by the Company upon the acquisition of
Howell.
(e) Represents the following cost changes as they relate to cost of sales:
Cost savings the Company would have realized from the
reduction in direct and indirect hourly and salaried
employees in connection with the acquisition of Lobdell.
Prior to the acquisition of Lobdell, the Company and Lobdell
formulated a plan to reduce the number of employees (the
"Workforce Reduction Plan") at Lobdell. Such plan was
initially implemented by Lobdell in October 1996 and was
continued by the Company subsequent to the acquisition of
Lobdell. The Workforce Reduction Plan was a substantive
factor in the Company's ultimate decision to acquire Lobdell
in addition to its determination of the purchase price. The
Company believes the cost savings it has achieved as a
result of the Workforce Reduction Plan have been achieved
without otherwise effecting or impairing its net sales and
believes such cost savings are permanent in nature. This was
accomplished by creating more efficient manufacturing and
production processes as well as eliminating employees
performing duplicate functions. As of the date of
acquisition (January 10, 1997), approximately 60% of the
employees covered by the Workforce Reduction Plan had been
terminated and approximately 90% of the employees covered by
the Workforce Reduction Plan had been terminated by January
31, 1997.................................................... $(6,501)
In accordance with the purchase method of accounting, the
Company recognized Lobdell's unfunded Accumulated
Postretirement Benefit Obligation ("APBO"), which included
Lobdell's unrecognized transition obligation of
approximately $11,500, at January 10, 1997. Accordingly,
this adjustment reflects the decrease in net periodic
postretirement benefit cost, from April 1, 1996 through
January 10, 1997, had Lobdell's unfunded APBO been
recognized at the beginning of the fiscal year.............. (564)
Increased depreciation expense as a result of the write up
of property, plant and equipment to fair market value as a
part of the acquisition of Lobdell.......................... 913
-------
$(6,152)
=======
(f) Represents increased depreciation expense as a result of the write up of
property, plant and equipment to fair market value as a part of the purchase
accounting adjustments relating to the pending acquisition of Howell.
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(g) Represents the following changes as they relate to selling, general and
administrative expenses:
Cost savings the Company would have realized from the
reduction in selling and administrative staff as a result of
the acquisition and the Workforce Reduction Plan. See Note
(e)......................................................... $(2,920)
Elimination of commissions paid by Lobdell to Grace Emery
Sales Corporation ("GESC"), a related Domestic International
Sales Corporation. These amounts ultimately represented
dividends paid to the prior shareholders of Lobdell. On a
pro forma basis, assuming the acquisition of Lobdell on
April 1, 1996, GESC was dissolved thereby eliminating the
commission payment.......................................... (370)
-------
$(3,290)
=======
(h) Represents amortization of acquisition expenses and goodwill generated by
the acquisition.
(i) The provision for equipment impairment and non-recurring charges includes:
(i) on a pro forma basis, for the year ended March 31, 1997, a $3,000
impairment reserve against certain long-lived assets of Laserweld, a $540
provision for liability under the WARN Act, $500 of excess legal and
professional fees associated with the marketing and sale of Lobdell and
$1,207 related to the loss before income tax for the discontinuance of the
Laserweld and Parallel operations and (ii) for the year ended March 31,
1997, the loss before income tax for the discontinuance of the Laserweld and
Parallel operations of $287. Management does not anticipate that these costs
will be a part of future operations.
(j) Represents the net effect on interest expense as a result of (1) the
elimination of historical interest expense after the repayment of the
existing senior bank credit facilities and other outstanding debt, using
proceeds from the Offering and (2) the Offering, using an interest rate of
10.125% per annum. This amount excludes interest on the portion of the
proceeds of the Offering used for the Howell acquisition. See Note (k).
(k) Represents the net effect on interest expense as a result of the use of
proceeds from the Offering for the acquisition of Howell of $22,902.
Interest expense is calculated using an interest rate of 10.125% per annum.
See Note (j).
(l) Represents the estimated income tax effect of the Company's pro forma
adjustments using an effective tax rate of 40%.
(m) Represents the estimated income tax effect of the Howell pro forma
adjustment using an effective rate of 40%.
(n) Adjusted EBITDA is defined as income (loss) before interest, income taxes,
depreciation and amortization and equipment impairment and non-recurring
charges. For the fiscal year ended March 31, 1997, equipment impairment and
non-recurring charges aggregated $287 and on a pro forma basis, for the
fiscal year ended March 31, 1997, equipment impairment and nonrecurring
charges aggregated $5,247, as described in Note (i) above. Adjusted EBITDA
should not be construed as a substitute for income from operations, net
income or cash flow from operating activities for the purpose of analyzing
the Company's operating performance, financial position and cash flows.
(o) Defined as the ratio of Adjusted EBITDA to total interest expense.
(p) Ratio of net debt to Adjusted EBITDA with net debt consisting of total debt
less cash and cash equivalents and unexpended bond proceeds.
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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table sets forth (i) the selected consolidated historical
financial data of the Predecessor for the years ended March 31, 1993 and 1994
which were derived from the audited consolidated financial statements of the
Predecessor, (ii) selected consolidated historical financial data of the
Predecessor for the year ended March 31, 1995 and the period from April 1, 1995
through October 27, 1995, (iii) selected consolidated historical financial data
of the Company from October 28, 1995 through March 31, 1996 and the year ended
March 31, 1997. The selected consolidated historical financial data for the year
ended March 31, 1995; the period April 1, 1995 through October 27, 1995; and the
period October 28, 1995 through March 31, 1996 was derived from the audited
consolidated financial statements of the Predecessor and the Company, which are
included elsewhere in this Prospectus, together with the report of Deloitte &
Touche, independent accountants. The selected consolidated historical financial
data for the year ended March 31, 1997 was derived from the audited consolidated
financial statements of the Company, which are included elsewhere in this
Prospectus, together with the report of Price Waterhouse LLP, independent
accountants. The following table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Pro Forma Combined Financial Data," and the Consolidated Financial
Statements of the Company and the related notes and other financial information
presented elsewhere in this Prospectus.
HISTORICAL
------------------------------------------------------------------------------------
PREDECESSOR COMPANY
--------------------------------------------------- ------------------------------
APRIL 1, 1995 - OCTOBER 28, 1995 -
MARCH 31, MARCH 31, MARCH 31, OCTOBER 27, MARCH 31, MARCH 31,
1993(a) 1994(a) 1995 1995 1996 1997
--------- --------- --------- --------------- ------------------ ---------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales............................ $65,169 $65,182 $75,097 $49,043 $35,572 $136,861
Gross profit......................... 5,970 5,955 4,206 2,148 3,948 11,773
Selling, general and
administrative..................... 1,889 2,164 4,554 3,922 2,235 7,685
Equipment impairment and nonrecurring
charges(b)......................... -- -- -- -- -- 287
------- ------- ------- ------- -------- --------
Operating income (loss).............. 4,081 3,791 (348) (1,774) 1,713 3,801
Interest expense..................... 1,904 1,658 1,267 1,048 1,096 3,388
Other income (expense)............... -- -- -- -- -- 2,201
Income (loss) before income taxes.... 2,177 2,133 (1,615) (2,822) 617 2,614
Provision (benefit) for income
taxes.............................. 56 706 (349) (938) 202 1,065
------- ------- ------- ------- -------- --------
Net income (loss).................... $ 2,121 $ 1,427 $(1,266) $(1,884) $ 415 $ 1,549
======= ======= ======= ======= ======== ========
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents............ $ 1,683 $ 4,261 -- -- -- $ 9,671
Accounts receivable.................. 10,256 7,936 $ 9,835 $13,312 $ 8,338 47,626
Inventories.......................... 3,205 3,542 4,170 4,429 3,719 13,411
Total assets......................... 39,727 36,127 41,523 59,770 49,200 246,461
Total debt........................... 15,595 13,396 12,907 23,233 26,758 99,829
Redeemable preferred stock........... -- -- -- -- -- 39,300
Total shareholders equity............ 12,590 12,406 10,833 9,329 935(c) 2,341
OTHER DATA:
Depreciation and amortization........ $ 1,825 $ 1,747 $ 1,413 $ 919 $ 687 $ 5,041
Capital expenditures................. 870 920 4,384 5,111 3,466 3,326
Adjusted EBITDA(d)................... 5,906 5,538 1,065 (855) 2,400 11,330
Gross margin(e)...................... 9.16% 9.14% 5.60% 4.38% 11.10% 8.60%
Adjusted EBITDA margin(f)............ 9.06 8.50 1.42 NM 6.75 8.28
Ratio of earnings to fixed
charges(g)......................... 2.1 2.2 -- -- 1.5 1.7
See Notes to Selected Consolidated Historical Financial Data.
- -------------------------
(a) Reflects the audited financial statements of the Predecessor prepared in
accordance with Canadian generally accepted accounting principals, with
Canadian dollars being converted to a U.S. dollar equivalent using average
Canadian to U.S. foreign currency exchange rates of 1.2326 and 1.3810,
respectively, for the periods ended March 31, 1993 and March 31, 1994.
(b) This provision includes income before taxes for the discontinuance of
Laserweld and Parallel. Management does not anticipate that these costs will
be a part of future operations.
(c) The reduction in equity of $8.4 million from the period ended October 27,
1995 to March 31, 1996, is primarily a result of the elimination of the
Predecessor's equity as a part of the purchase accounting adjustments made
upon the acquisition of the Predecessor on October 27, 1995.
(d) Adjusted EBITDA is defined as income (loss) before interest, income taxes,
depreciation and amortization and equipment impairment and non-recurring
charges. For the fiscal year ended March 31, 1997, equipment impairment and
non-recurring charges aggregated $0.3 million. Adjusted EBITDA should not be
construed as a substitute for income from operations, net income or cash
flow from operating activities for the purpose of analyzing the Company's
operating performance, financial position and cash flows.
(e) Gross margin is defined as gross profit as a percent of net sales for each
of the applicable periods.
(f) Adjusted EBITDA margin is defined as Adjusted EBITDA as a percent of net
sales for each of the applicable periods.
(g) For purposes of this computation, earnings consist of income (loss) before
income taxes plus fixed charges. Fixed charges consist of interest on
indebtedness plus that portion of rental expense representative of the
interest factor. For fiscal 1995, the Company's earnings were insufficient
to cover fixed charges by $1.6 million. For the period April 1, 1995 to
October 27, 1995, the Company's earnings were insufficient to cover fixed
charges by $2.8 million.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition
and results of operations should be read in conjunction with the "Pro Forma
Combined Financial Data" and the Consolidated Financial Statements of the
Company and notes thereto included elsewhere in this Prospectus. The historical
information for the fiscal year ended March 31, 1997 includes the Lobdell
results of operations for the period subsequent to its acquisition. For
comparative purposes, the financial information for the fiscal year ended March
31, 1996 represents the combination of the results of operations for the
Predecessor for the period from April 1, 1995 to October 27, 1995 together with
the results of operations of the Company from October 28, 1995 through March 31,
1996 (the period subsequent to the acquisition of the Predecessor by the
Company). The financial statements of the Predecessor and the Company in the two
combined periods are not comparable in certain respects due to differences
between the cost basis of certain assets held by the Company versus that of the
Predecessor, resulting in reduced depreciation and amortization charges
subsequent to October 27, 1995, changes in accounting policies and the recording
of certain liabilities at the date of acquisition in connection with the
purchase of the Predecessor by the Company. Accordingly, the combination of
these two periods does not purport to represent what the results of operations
of the Company would have been on a pro forma basis had it acquired the
Predecessor on April 1, 1995.
Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31, 1996
Net Sales -- Net sales for the year ended March 31, 1997 were $136.9
million, including the net sales of Lobdell from January 10, 1997 (the
"Acquisition Date") through March 31, 1997. This was an increase of $52.3
million or 61.8% as compared to net sales for the fiscal year ended March 31,
1996 of $84.6 million. The increase was due principally to the acquisition of
Lobdell and was partially offset by lower sales volume due to model changeovers.
On a pro forma basis, if Lobdell net sales were included with that of the
Company for the entire fiscal year ended March 31, 1997, net sales would have
been $330.2 million, an increase of $245.6 million as compared to the prior
year.
Gross Profit -- Gross profit was $11.8 million or 8.6% of net sales for the
year ended March 31, 1997 as compared to $6.1 million or 7.2% of net sales for
the year ended March 31, 1996. This represents an increase of $5.7 million, or
93.4% as compared to the prior year. The increase was primarily a result of
higher margins on Lobdell sales for the eighty day period from the Acquisition
Date through March 31, 1997. Gross profit also increased due to (i) workforce
reductions, (ii) improved materials cost management which resulted in lower raw
material costs and (iii) strong sales in the light truck and SUV markets, the
Company's largest sales segments and those which produce its highest margins.
The increased gross profit was partially offset by costs associated with the
production launch of the Saturn Coupe stampings.
On a pro forma basis with Lobdell included for the entire fiscal year,
gross profit for the fiscal year ended March 31, 1997 would have been $24.5
million or 7.4% on net sales of $330.2 million. On a pro forma basis, the
Company's gross margin was lower due to operational inefficiencies existing at
Lobdell prior to acquisition. Subsequent to the acquisition, actions taken to
correct those inefficiencies improved the Company's gross margin as reflected in
the historical results for the year ended March 31, 1997 where the acquisition
of Lobdell is included only for the period subsequent to the Acquisition Date.
Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses were
$7.7 million or 5.6% of net sales for the year ended March 31, 1997 as compared
to $6.2 million or 7.3% of net sales for the year ended March 31, 1996. The
decrease as a percentage of net sales was a result of efficiencies and cost
reduction programs undertaken by Company management. Specifically, the reduction
in SG&A expenses as a percentage of net sales resulted from a restructuring of
the sales and product engineering functions into customer focused business
units.
Operating Income -- Income from operations was $3.8 million or 2.8% of net
sales for the year ended March 31, 1997 as compared to a deficit of $0.1 million
for the year ended March 31, 1996. The improvement
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31
of $3.9 million was a result of improved gross profit of $5.7 million, partially
offset by increased SG&A expenses of $1.5 million.
Other Income -- Other income for the year ended March 31, 1997 was $2.2
million or 1.6% of net sales due primarily to foreign currency exchange
transactions. No significant other income was earned for the year ended March
31, 1996.
Interest Expense -- Interest expense for the year ended March 31, 1997 was
$3.4 million or 2.5% of net sales, an increase of $1.3 million over the interest
expense for the year ended March 31, 1996. While interest expense for both
periods remained constant at 2.5% of net sales, the increase of $1.3 million was
a result of variations in base lending rates and additional borrowings resulting
from the acquisition of Lobdell.
Income Tax -- Income tax expense was $1.1 million or 0.8% of net sales for
the period ended March 31, 1997 as compared to a benefit of $0.7 million or 0.8%
of net sales for the year ended March 31, 1996. The increased income tax expense
of $1.8 million is a result of the $4.8 million increase in income before taxes
for the year ended March 31, 1997 as compared to the previous year.
Net Income -- Net income was $1.5 million or 1.1% of net sales for the year
ended March 31, 1997 as compared to a loss of $1.5 million or 1.8% of net sales
for the year ended March 31, 1996. The improvement of $3.0 million was a result
of improved operating income of $3.9 million and increased other income of $2.2
million. The increase in net income was partially offset by increased interest
expense and income taxes of $1.3 million and $1.8 million, respectively.
Adjusted EBITDA -- Adjusted EBITDA was $11.3 million or 8.3% of net sales
for the year ended March 31, 1997. This represented an increase of $9.8 million
over Adjusted EBITDA of $1.5 million or 1.8% of net sales for the year ended
March 31, 1996. The increase was a result of: (i) a $5.7 million improvement in
gross profit, (ii) an increase in other income of $2.2 million and (iii) $3.4
million in additional depreciation. This increase was partially offset by a $1.5
million increase in SG&A expenses. On a pro forma basis with Lobdell included
for the entire fiscal year, Adjusted EBITDA for the year ended March 31, 1997
was $28.2 million or 8.5% of net sales, an increase of $26.7 million as compared
to the prior year.
Fiscal Year Ended March 31, 1996 Compared to Fiscal Year Ended March 31, 1995
Net Sales -- Net sales for the year ended March 31, 1996 were $84.6
million, an increase of $9.5 million or 12.6% from $75.1 million in the year
ended March 31, 1995. The increase was due principally to the continued growth
of the light truck and SUV market segments, specifically the production launch
of the K-truck control arm for GM's full size, four wheel drive light trucks and
SUVs.
Gross Profit -- Gross profit was $6.1 million, or 7.2% of net sales, for
the year ended March 31, 1996 as compared to $4.2 million, or 5.6% of net sales,
for the year ended March 31, 1995. This represented an increase of $1.9 million,
or 45.2% as compared to the prior year. The increase in gross profit was a
result of actions taken by management subsequent to the acquisition of the
Predecessor pursuant to which certain manufacturing processes were implemented
to improve efficiency in the production of the GM light truck and SUV control
arms. The improvement in manufacturing was combined with a reduction in the
salary and hourly workforce based upon the implementation of a comprehensive
business plan designed to reduce costs.
Selling, General and Administrative Expenses -- SG&A expenses were $6.2
million or 7.3% of net sales for the year ended March 31, 1996 as compared to
$4.6 million, or 6.1% of net sales, for the year ended March 31, 1995. The
increase was a result of the creation of an in-house sales and engineering team
dedicated to the development of new business. The Predecessor's sales were
primarily handled by a manufacturer's representative firm.
Operating Income -- Income from operations was a deficit of $0.1 million
for the year ended March 31, 1996 as compared to a deficit of $0.3 million for
the year ended March 31, 1995. The improvement of $0.2 million was a result of
increased gross profit and continued strong sales of light trucks and SUVs. The
increase was partially offset by increased SG&A expenses related to the creation
of an in-house sales and engineering group.
29
32
Interest Expense -- Interest expense was $2.1 million or 2.5% of net sales
for the year ended March 31, 1996 as compared to $1.3 million or 1.7% of net
sales for the year ended March 31, 1995. The increase of $0.8 million was a
result of increased debt related to the acquisition of the Predecessor by the
Company.
Income Tax -- Income tax was a benefit of $0.7 million or 0.8% of net sales
for the period ended March 31, 1996 as compared to a benefit of $0.3 million or
0.4% of net sales for the year ended March 31, 1995. The increased benefit of
$0.4 million was primarily the result of the increased loss before taxes for the
year ended March 31, 1996 and changes in the effective tax rate.
Net Income -- The Company had a net loss of $1.5 million or 1.8% of net
sales for the period ended March 31, 1996 as compared to a net loss of $1.3
million or 1.7% of net sales for the year ended March 31, 1995. The increased
loss of $0.2 million was a result of increased SG&A and interest expense of $1.6
million and $0.8 million, respectively, and was partially offset by improved
gross profit.
Adjusted EBITDA -- Adjusted EBITDA was $1.5 million or 1.8% of net sales
for the year ended March 31, 1996 as compared to $1.1 million, or 1.5% of net
sales for the year ended March 31, 1995. The increase of $0.4 million as
compared to the prior year was primarily a result of improved gross profit of
$1.9 million and $0.2 million in additional depreciation. The increase was
partially offset by increased SG&A expenses of $1.6 million.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Net income adjusted for non-cash charges generated approximately $8.5
million of cash for the year ended March 31, 1997. Offsetting this increase in
cash was a net increase in accounts receivable, customer tooling and other
noncurrent assets of $7.0 million, a decrease in accrued employee compensation
of $6.0 million and other working capital requirements of $3.3 million,
resulting in a use of cash from operating activities of $7.8 million for the
year ended March 31, 1997. During fiscal 1997, the Company used approximately
$12.3 million for investing activities including transaction related expenses
incurred in connection with the acquisition of Lobdell and the purchase of
property and equipment. These cash requirements were funded by approximately
$29.8 million in borrowings.
Capital expenditures were $3.3 million, or 2.4% of net sales for the year
ending March 31, 1997 as compared to $8.6 million, or 10.2% of net sales for the
year ending March 31, 1996. The decrease of $5.3 million or 61.6%, was due
primarily to the timing of capital expenditures relating to major production
launches, specifically the production launch of the Saturn Coupe stampings in
fiscal 1996. On a pro forma basis including Lobdell for the full year, capital
expenditures were $16.2 million or 4.9% of net sales for fiscal 1997 and
principally consisted of investments to support new business (primarily the
press line for the Saturn Coupe and expansion of K-truck control arm capacity),
laser welding equipment, press equipment, safety and maintenance equipment,
robotic automation and other productivity improvement expenditures, and other
items including computers, welding equipment, vehicles and paint equipment. In
addition, on a pro forma basis for Lobdell and the acquisition of Howell the
Company would have had capital expenditures of $19.6 million or 4.6% of net
sales for fiscal 1997.
For fiscal 1998 (excluding Howell), the Company's capital expenditures are
expected to be $15.9 million; consisting of a $7.4 million investment to support
new business (primarily the Innovate Program); $1.3 million related to the start
up of the Mexican operations; $2.0 million for the purchase of scrap handling
systems; $0.7 million for robotic automation upgrades; $1.2 million for press
rebuilds; $1.8 million in productivity automation equipment; and $1.5 million in
other expenditures including health and maintenance items, welders and water
pre-treatment system. Assuming the acquisition of Howell is consummated, the
Company plans to spend an additional $4.2 million on capital expenditures in
fiscal 1998.
The Company has available net operating loss carry forwards at March 31,
1997 for Canadian income taxes. These net operating loss carry forwards have
future Canadian tax benefits of approximately $2.9 million. The Canadian net
operating losses can be carried forward indefinitely. The Company also has
Alternative Minimum Tax Credit carry forwards at March 31, 1997 applicable to
U.S. taxes for $3.0 million, which can be carried forward indefinitely.
30
33
The Company believes that cash generated from operations, together with
amounts available under the Senior Credit Facility and unused portions of the
proceeds from the Offering, will be adequate to meet its debt service
requirements, capital expenditures and working capital needs for the foreseeable
future, although no assurance can be given in this regard. The Company's future
operating performance and ability to service or refinance the Notes and to
extend or refinance its other indebtedness will be subject to future economic
conditions and to financial, business and other factors that are beyond the
Company's control.
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34
THE EXCHANGE OFFER
Pursuant to the Registration Agreement, the Company agreed (i) to file a
registration statement with respect to a registered offer to exchange the Old
Notes for the New Notes, which will have terms substantially identical in all
material respects to the Old Notes (except that the New Notes will not contain
terms with respect to transfer restrictions, registration rights and certain
interest rate step-up provisions) within 45 days after the date of original
issuance of the Old Notes, and (ii) to use reasonable best efforts to cause such
registration statement to become effective under the Securities Act at the
earliest possible time but in any event no later than 120 days after issuance of
the Old Notes. In the event that applicable law or interpretations of the Staff
of the Commission do not permit the Company to file the registration statement
containing this Prospectus or to effect the Exchange Offer, or if certain
holders of the Old Notes notify the Company that they are prohibited by law or
Commission policy from participating in the Exchange Offer, or subject to other
restrictions, the Company will use its reasonable best efforts to cause to
become effective the shelf registration statement with respect to the resale of
the Old Notes and to keep the shelf registration statement effective until the
earlier of three years following the date the shelf registration statement is
declared effective by the Commission and such time as all the Notes have been
sold thereunder. Holders of Old Notes do not have any appraisal or dissenters'
rights in connection with the Exchange Offer.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1997; provided, however, that if the
Company has extended the period of time for which the Exchange Offer is open,
the term "Expiration Date" means the latest time and date to which the Exchange
Offer is extended.
As of the date of this Prospectus, $125.0 million aggregate principal
amount of the Old Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about ,
1997 to all holders of Old Notes known to the Company. The Company's obligation
to accept Old Notes for exchange pursuant to the Exchange Offer is subject to
certain conditions as set forth under "-- Certain Conditions to the Exchange
Offer" below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for any exchange of any Old Notes, by giving notice of
such extension to the holders thereof. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering holder thereof
as promptly as practicable after the expiration or termination of the Exchange
Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "-- Certain Conditions to the Exchange Offer." The Company
will give notice of any extension, amendment, non-acceptance or termination to
the holders of the Old Notes as promptly as practicable, such notice in the case
of any extension to be issued no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to First Trust National Association,
(the "Exchange Agent") at one of the addresses set forth below under "Exchange
Agent" on or prior to the Expiration Date.
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In addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY
OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT
THE ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS
RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
COMPANY.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder of Old Notes to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such owner's own behalf, such owner
must, prior to completing and executing the Letter of Transmittal and delivering
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or obtain a properly completed
bond power from the registered holder of Old Notes. The transfer of registered
ownership may take considerable time and may not be able to be completed prior
to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instruction" or "Special
Delivery Instructions" on the Letter of Transmittal, or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States or an eligible guarantor
institution within the meaning of Rule 17Ad-15 under the Exchange Act which is a
member of one of the recognized signature guarantee programs identified in the
Letter of Transmittal (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Old Notes surrendered for exchange must be endorsed by, or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by, the registered holder with the signature thereon guaranteed by an
Eligible Institution. If the Letter of Transmittal or any Old Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other
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person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall any
of them incur any liability for failure to give such notification.
By tendering, each broker-dealer holder will represent to the Company that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the holder and any
beneficial holder, that neither the holder nor any such beneficial holder has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the Company. If
the holder is not a broker-dealer, the holder must represent that it is not
engaged in nor does it intend to engage in a distribution of the New Notes.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Old Notes for exchange when, as and if the
Company has given oral and written notice thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, and (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible Institution a properly competed and
duly executed Notice of Guaranteed Delivery, substantially in the form provided
by the Company (by telegram, telex, facsimile, mail or hand delivery), setting
forth the name and address of the holder of Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange ("NYSE") trading days after the
Expiration Date, the certificates for all physically tendered Old Notes, in
proper form for transfer, or a confirmation of book-entry transfer of such Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation"), as the case may be, a properly completed and duly
executed Letter of
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Transmittal and any other documents required by the Letter of Transmittal will
be deposited by the Eligible Institution with the Exchange Agent.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the business day prior to the Expiration Date. For a
withdrawal to be effective, a written notice of withdrawal must be received by
the Exchange Agent at one of the addresses set forth below under "Exchange
Agent." Any such notice of withdrawal must specify the name of the person having
tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes), and (where certificates for
Old Notes have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange Agent,
then, prior to the release of such certificates, the withdrawing holder must
also submit the serial numbers of the particular certificates to be withdrawn
and a signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such holder is an Eligible Institution. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book entry transfer
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer if, at any time
before the acceptance of such Old Notes for exchange or the exchange of New
Notes for such Old Notes, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the Staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "TIA"). In any such event the Company is required to use every reasonable
effort to obtain the withdrawal of any stop order at the earliest possible time.
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EXCHANGE AGENT
First Trust National Association, has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the Exchange Agent addressed as follows.
By Hand By Registered Certified or
(New York depository only) By Hand (all others) Overnight Mail:
-------------------------- -------------------- --------------------------
First Trust of New York First Trust National First Trust National
100 Wall Street, 20th Floor Association Association
New York, NY 10005 Fourth Floor -- Bond Drop Attn.: Specialized Finance
Attention: Cathy Donohue Window 180 East Fifth Street
180 East Fifth Street St. Paul, MN 55101
St. Paul, MN 55101
By First Class Mail: By Facsimile: By Telephone:
-------------------- ------------- -------------
First Trust National (612) 244-1537 (800) 934-6802
Association (For Eligible Institutions Bondholder Services
P.O. Box 64485 Only)
St. Paul, MN 55101
DELIVERY OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the principal amount as reflected in the Company's accounting records
on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the Exchange Offer will be
capitalized for accounting purposes.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of, the Securities
Act and applicable state securities law. Old Notes not exchanged pursuant to the
Exchange Offer will continue to accrue interest at 10 1/8% per annum and will
otherwise remain outstanding in accordance with their terms. In general, the Old
Notes may not be
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offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. However if (i) the
Initial Purchasers so request with respect to Old Notes held by them following
consummation of the Exchange Offer, or (ii) any holder of Old Notes is not
eligible to participate in the Exchange Offer, or (iii) any holder of Old Notes
that participates in the Exchange Offer does not receive freely tradable New
Notes in exchange for Old Notes, the Company is obligated to file a shelf
registration statement on the appropriate form under the Securities Act relating
to the Old Notes held by such persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company is of the view that New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, or (ii) any broker-dealer that purchases Notes from the Company
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such New Notes. If any
holder has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, such holder (i)
could not rely on the applicable interpretations of the staff of the Commission,
and (ii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction. A
broker-dealer who holds Old Notes that were acquired for its own account as a
result of market-making or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of New Notes. Each such broker-dealer that receives
New Notes for its own account in exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge in the Letter of Transmittal that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Agreement and subject to certain specified
limitations therein, to register or qualify the New Notes for offer or sale
under the securities or blue sky laws of such jurisdictions as any holder of the
Notes reasonably requests in writing.
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BUSINESS
GENERAL
The Company is a leading Tier 1 designer and producer of high-quality,
engineered metal components, assemblies and modules used by OEMs. The Company's
core products are complex, high value-added products, primarily assemblies
containing multiple stamped parts and various welded, hemmed or fastened
components. These products which range from large structural stampings and
assemblies, including exposed Class A surfaces, to smaller complex welded
assemblies, are used in manufacturing of a variety of SUVs, light and medium
trucks, mini-vans, vans and passenger cars. The Company is the sole source
supplier of these products to its customers. On a pro forma basis, assuming the
acquisition of Lobdell had occurred on April 1, 1996, the Company would have had
net sales of $330.2 million and Adjusted EBITDA of $28.2 million (adjusted for
non-recurring items) for the fiscal year ended March 31, 1997. On a pro forma
basis for the fiscal year ended March 31, 1997, assuming the acquisitions of
Lobdell and Howell had occurred on April 1, 1996, net sales and Adjusted EBITDA
for the Company would have been $421.7 million and $31.7 million, respectively.
Based on pro forma net sales of $330.2 million, management believes the Company
is one of the ten largest suppliers of stampings to the North American
automotive market.
The Company's four largest customers, GM, Ford, CAMI and Saturn, accounted
for approximately 56.0%, 33.0%, 3.0%, and 2.8%, respectively, of the Company's
net sales for the fiscal year ended March 31, 1997, on a pro forma basis for the
Lobdell acquisition. The Company has been providing products directly to GM and
Ford for more than 50 years and has earned outstanding commercial ratings for
its high-quality standards, including GM's Supplier of the Year and Mark of
Excellence Awards, Ford's Q1 Award, and CAMI's President's Award. The Company
also sells its products to other Tier 1 suppliers. For the fiscal year ended
March 31, 1997, approximately 72.0% of the Company's net sales, on a pro forma
basis, were derived from sales of its products manufactured for SUVs, mini-vans,
vans and light trucks. In recent years, SUVs, mini-vans, vans and light trucks
have experienced stronger growth in vehicle production as compared to the
passenger car sector, with a CAGR from 1991 to 1996 of approximately 8.7% as
compared to (0.1%) for the passenger car sector. This sector includes those
platforms and models which have strong consumer demand, such as GM's popular C/K
platform (full-size pickups and the Yukon/Tahoe/Suburban models) and the Ford
Ranger, Explorer and Windstar.
The Company conducts its business through two principal operations, BMG and
Lobdell. Since acquiring BMG in October 1995, management of the Company has
implemented significant cost reductions and achieved manufacturing efficiencies,
including manpower reductions consisting of 49 salaried positions (121 to 72)
and 78 hourly employees (570 to 492) and improved materials cost management,
which includes purchasing cost savings, reduction of scrap and inventory costs,
and improved scheduling of production. These actions resulted in a $4.6 million
improvement in Adjusted EBITDA from the fiscal year ended March 31, 1996 to the
fiscal year ended March 31, 1997. The same strategy utilized at BMG was
implemented at Lobdell immediately following its acquisition in January 1997.
Since its acquisition of Lobdell, the Company has achieved cost reductions
totaling $13.6 million on an annual basis. In addition to the cost reductions,
the Company has been able to implement a number of manufacturing policies that
have improved productivity and quality, notwithstanding overall staff
reductions.
The strategic combination of BMG and Lobdell significantly strengthens the
Company's position as a leading Tier 1 supplier of assemblies and modules to the
OEMs. This combination provides the Company with the critical mass and
capabilities in the areas of design and engineering, sales and marketing, and
product expertise which provide the basis for the Company's strategy of becoming
a fully-integrated, global systems supplier. The Company has already implemented
a successful, focused sales and marketing initiative, which commenced
concurrently with the operational improvements at BMG. As a result, the Company
has been awarded the door assemblies and the side panel package for the Innovate
Program. Management believes these awards from Saturn will generate
approximately $60.0 million of annual net sales beginning with the 1999 model
year.
The Company currently operates eight manufacturing facilities which offer
the latest technologies in metal stamping, welding and assembly production
equipment, including fully-automated hydraulic and
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wide-bed press lines (up to 180 inches), robotic welding cells, robotic hemming
and autophoretic corrosion resistant coating. Since 1992, the Company has
invested in excess of $93.0 million in capital investments to support sales
growth, expand production capabilities and improve efficiency and flexibility.
The Company's diverse line of over 200 presses that range up to 2,500 tons and
state-of-the-art robotic weld assembly and hemming equipment are capable of
manufacturing a broad assortment of parts and assemblies ranging from simple
stampings to full-size, Class A door and closure panels. The Company is one of a
few independent suppliers that has the ability to produce large, complex
stampings, as well as the technical expertise and automated assembly
capabilities that provide high value-added modules such as door apertures and
assemblies, A-pillars, Class A surface products and control arms.
BUSINESS STRATEGY
The principal objective of the Company is to be a leading, full-service,
global Tier 1 supplier of integrated systems based on metal forming and related
manufacturing technologies. Management believes that the Company is well
positioned to benefit from two significant trends in the stamping and metal
forming segments of the automotive industry: outsourcing and consolidation.
Outsourcing of metal stamping has increased in response to competitive pressures
on OEMs to improve quality and reduce capital requirements, labor costs,
overhead and inventory. Consolidation among automotive industry suppliers has
occurred as OEMs have more frequently awarded long-term sole source contracts to
the most capable global suppliers. In addition, OEMs are increasingly seeking
systems suppliers who can provide a complete package of design, engineering,
manufacturing and project management support for an integrated system (such as a
front-end system). The Company intends to capitalize on these trends through
internal development and strategic acquisitions. The key elements of the
Company's strategy include the following:
Provide Full-Service Program Capability. The Company is focused on
developing full-service program capabilities. The Company works with OEMs
throughout the product development process from concept and prototype
development through the design and implementation of manufacturing processes.
The Company's ability to provide the package of design, engineering,
prototyping, tooling, blanking, stamping, assembly, corrosion resistant coating
and custom shipping rack fabrication to its customers creates a unique
capability present in only a limited number of suppliers. The Company believes
this capability will enable it to manage large programs, assist it in reducing
customer program launch time, lower customer costs and increase its margins.
Supply Complex, High Value-Added Systems. As a result of the Company's
technical design and engineering capabilities and its reputation for
highly-efficient manufacturing operations, the Company is able to secure supply
relationships for complex, high value-added products, primarily assemblies and
modules that contain multiple stamped parts and various welded, hemmed or
fastened components. For example, the Company produces the rear door for GM's
Yukon/Tahoe/Suburban vehicles, the lower control arm for GM's four wheel drive
C/K vehicles, the radiator support assembly for GM's W-car (Grand Prix, Century,
Lumina, Monte Carlo and Intrigue), and complex A-pillar assemblies for the Ford
Mustang and the Ford Ranger pickup. These complex products typically generate
higher dollar content per vehicle as well as higher margins for the Company as
compared to simple, individual stampings. The Company plans to capitalize on its
ability to develop and provide integrated modules and assemblies to deliver to
the OEMs an integrated product such as a complete door or front-end system. In
addition to doors, radiator supports and Class A surface components, the Company
has unique expertise with respect to control arms, which will be further
developed as a component part of the entire drive control system.
Focus on High Growth Vehicle Categories. The Company's sales and marketing
efforts have been, and will continue to be, directed toward sectors of the
automotive market that have experienced strong consumer demand. For the fiscal
year ended March 31, 1997, approximately 72.0% of the Company's net sales on a
pro forma basis for the acquisition of Lobdell were derived from sales of
products manufactured for SUVs, mini-vans, vans and light trucks. The SUV market
alone has been the fastest growing segment in the North American new automotive
sales market with 1991 to 1996 vehicle production growth at a CAGR of
approximately 18.3%. Similarly, the Company's sales to the passenger car market
have been, and will continue to be, directed to the segments with stronger sales
growth, including Saturn cars. For example, the growth in
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vehicle production in the passenger car sector has been flat during the past
five years while production of Saturn cars grew from 1992 to 1996 at a CAGR of
approximately 9.2%.
Establish a Global Presence. The Company is actively pursuing strategic
acquisitions and joint-venture opportunities in Europe and intends to pursue
opportunities which will allow the Company to establish a presence in South
America, Asia and other markets in order to serve its customers on a global
basis. Several OEMs have announced certain models designed for the World Car. As
a result, the OEMs have encouraged their existing suppliers to establish foreign
production support for World Car programs. This globalization provides access to
new customers and technology, as well as economic cycle diversification. At the
request of GM de Mexico, the Company is in the process of establishing a
presence in Mexico. In 1997, the Company will begin manufacturing and assembling
components for business recently awarded by GM de Mexico.
Pursue Strategic Acquisitions. In response to the trend in the OEM market
toward "systems suppliers," the Company is focused on making strategic
acquisitions that will enhance the Company's ability to provide integrated
systems (such as a door or front end systems) or otherwise leverage its existing
business by providing additional product, manufacturing and service
capabilities. The Company also intends to pursue acquisitions which will expand
its customer base by providing an entree to new customers, including the North
American operations of Asian and European based OEMs. Consistent with this
strategy, the pending acquisition of Howell provides an entree to Chrysler. The
Company believes that the continuing supplier consolidation in the stamping and
metal forming segments may also provide attractive opportunities to acquire
high-quality companies at favorable prices, including businesses which can be
improved financially through overhead elimination, organizational restructuring,
plant reconfiguration, labor contract negotiations and management changes. The
Company will also pursue acquisitions that enable it to achieve a global
presence.
RECENT DEVELOPMENTS
On May 21, 1997, the Company signed the Merger Agreement pursuant to which
it will consummate the Merger with Howell. Howell is a Tier 1 manufacturer of
high-quality welded subassemblies and detailed stampings used primarily in
suspension system applications in the production of SUVs, light trucks,
mini-vans, vans and passenger cars. Pursuant to the Merger Agreement, the
shareholders of Howell will receive approximately $23.4 million in cash. The
Company also executed a shareholder agreement pursuant to which it has received
from the principal shareholder an option to purchase its Shares, which
constitute approximately 32.6% of the issued and outstanding shares of common
stock of Howell, at any time prior to December 31, 1997, together with such
shareholder's agreement to vote all such Shares in favor of the Merger.
For the nine months ended April 30, 1997, Howell had net sales of $72.4
million and Adjusted EBITDA of $4.2 million. Howell's net sales have grown from
$39.4 million for the fiscal year ended July 31, 1992 to $79.2 million for the
fiscal year ended July 31, 1996. On a pro forma basis for fiscal 1997, assuming
the acquisitions of Lobdell and Howell had occurred on April 1, 1996, net sales
and Adjusted EBITDA for the Company would have been $421.7 million and $31.7
million, respectively.
The acquisition of Howell is consistent with the strategic objectives of
the Company. Howell has a significant relationship with Chrysler and has
developed a niche in designing, engineering and manufacturing suspension control
arms in a variety of configurations and variations depending on drive-train and
suspension application. Approximately 54.0% of Howell's net sales for the nine
months ended April 30, 1997, were derived from acquisitions products used in the
control arm suspension applications. On a pro forma basis assuming the
acquisitions of Lobdell and Howell had occurred on April 1, 1996, the Company
would have derived approximately 23.0% of its net sales from suspension
applications for fiscal 1997.
Howell's expertise in this area is complementary to the Company's and will
enhance its ability to develop key suspension system components. Further,
Howell's sales are principally in the high-growth vehicle categories of SUVs,
light trucks, mini-vans and vans, the same market targeted by the Company. The
acquisition of Howell also provides the Company an entree to Chrysler and will
strengthen the Company's existing relationship with Ford. Sales to Chrysler and
Ford represented 47.0% and 53.0%, respectively, of Howell's net sales for the
nine months ended April 30, 1997. On a pro forma basis for fiscal 1997,
including the full year effect of Lobdell and Howell, (i) the SUV, mini-van, van
and light truck segment represented
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approximately 75.0% of net sales and (ii) the Company's net sales by major
customers would have been approximately as follows: GM 44.0%; Ford 37.0%;
Chrysler 11.0%; CAMI 2.0%, and Saturn 2.0%.
Howell's two manufacturing facilities, located in Masury, Ohio and Lapeer,
Michigan, have received Chrysler's Gold Pentastar Award for the 1996 model year
and Ford's Q1 rating. In addition, Howell has achieved certification as a
registrant under the QS-9000 program at its Lapeer facility and its
headquarters.
The Company expects that the transaction with Howell will be consummated in
the second quarter of fiscal 1998, subject to the satisfaction of standard
closing conditions.
INDUSTRY TRENDS
The OEM market to which the Company sells its products consists of the
design, engineering, development, production and sale of parts, components,
assemblies and modules or systems (several components assembled together) for
use in the manufacture of new motor vehicles. The Company's performance, growth
and strategic plan are directly related to certain trends within the OEM market.
Since the 1980s, Chrysler, Ford and GM have each been substantially reducing the
number of suppliers that may bid for awards and outsourcing an increasing
percentage of their production requirements. As a result of these trends, the
OEMs are focusing on the development of long-term, sole source relationships
with suppliers who can provide more complex parts, as well as complete
subassemblies and modules on a just-in-time basis while at the same time meeting
strict quality requirements. These requirements are accelerating the trend
toward consolidation of the OEMs supplier base as those suppliers who lack the
capital and production expertise to meet the OEMs needs, either cease to operate
or are merged with larger suppliers. OEMs benefit from outsourcing because
outside suppliers generally have significantly lower cost structures and, as
described below, suppliers can assist in shortening development periods for new
products.
In addition to consolidation and outsourcing, suppliers are participating
earlier in the design and engineering process, providing research, as well as
product development, product testing/validation, prototyping and tooling. OEMs
generally expect Tier 1 suppliers to (i) participate in the design and
engineering of complex assemblies, (ii) develop the required manufacturing
process to deliver these assemblies on a just-in-time basis, and (iii) assume
responsibility for quality control. This results in shorter development times
for new products, as well as higher quality and lower parts costs.
While the focus today by the OEMs is on quality, cost and service, the
Company believes that the focus for the future will be on global capabilities,
innovation and ability to provide value-added products and systems. The OEMs
have been very successful in making high-quality and low cost a minimum
requirement to remain in the industry, as opposed to a competitive advantage for
certain suppliers.
These evolving requirements can best be addressed by suppliers with
sufficient resources to meet such demands. For full-service suppliers such as
the Company, this environment provides an opportunity to grow by obtaining
business previously provided by other suppliers who can no longer meet the
current or future requirements and expectations of the OEMs and by acquisitions
that further enhance product manufacturing and service capabilities. Although
the requirements of the OEMs have already resulted in significant consolidation
of component suppliers in many product segments, the Company believes that many
opportunities exist for further consolidation within the Company's stamping and
metal forming segment.
PRODUCTS
The Company generates the majority of its net sales from large, complex,
high value-added products, primarily assemblies that generally consist of
multiple parts, which the Company stamps and combines with various welded or
fastened components. The Company is the sole source supplier of these complex
modules and assemblies. These products include unexposed components and
assemblies that are intrinsic to the structural integrity of the vehicle such as
A-pillars, radiator supports, floor pans, toe-to-dash panels, frame and
suspension components and reinforcements. In addition to unexposed components
and assemblies, the Company has the capability and expertise to produce Class A
surfaces such as door assemblies, door apertures, rocker panels, fuel filler
doors, and box side outers, which require virtually flawless finishes and
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more stringent customer requirements than unexposed assemblies. These products
require superior engineering and automated manufacturing and assembly
capabilities due to their complexity and high volume requirements.
While the Company has the capability to produce small stampings, such as
brackets and braces, it focuses on more complex and larger components and
assemblies which typically generate higher dollar content per vehicle as well as
higher margins for the Company. These assemblies, such as the A, B and C
pillars, control arms, door assemblies, door apertures, deck lids and radiator
supports require larger, high tonnage, wide-bed, fully-automated press
capabilities, complex automated weld and hemming assembly, autophoretic
corrosion resistant coating, machining, and automated assembly of purchased
components. The Company was recently awarded the door assembly and side panel
packages for the Innovate Program that are expected to generate approximately
$60.0 million per annum in net sales over a four to five year model life cycle
beginning in 1999. In addition, the Company has been awarded approximately $3.4
million in new business from GM de Mexico providing blanks and assembling floor
assemblies. It is expected that these programs will start in the third and
fourth quarters of fiscal 1998.
In addition to these products and services, the Company designs,
fabricates, paints and assembles custom shipping containers and racks for the
automotive industry. These custom racks and containers are typically designed
for specific components and assemblies and are sold both to OEMs as well as Tier
1 and Tier 2 suppliers. Rack sales for fiscal 1997 were approximately $7.8
million on a pro forma basis for the acquisition of Lobdell.
The chart below details by major customer the Company's major products, the
type of vehicle and the model/platform for which they are produced:
CUSTOMER COMPONENT TYPE MODEL/PLATFORM
- -------- --------- ---- --------------
General Motors....... Door Assemblies Sport Utility Suburban/Yukon/Tahoe
Door Apertures Suburban/Yukon/Tahoe
Rocker Panels Suburban/Yukon/Tahoe
Lower Control Arms Suburban/Yukon/Tahoe
Door Apertures Light Trucks C/K Full Size Crewcab Pickup
Lower Control Arms C/K Full Size Four Wheel Drive
Rocker Panels C/K Full Size Crewcab Pickup
A-Pillar Inners Mini-Vans Safari/Astro
Struts Safari/Astro
Lower Control Arms Safari/Astro
Toe-to-Dash Panel Medium Duty Commercial Chassis
Floor Assembly Kodiak
Fuel Straps Kodiak
Raised Roof Panel Kodiak
Radiator Supports Passenger Grand Prix, Regal, Intrigue,
Monte Carlo, Lumina
Floor Panels Corvette/EVI
Wheel Houses EVI
Door Beams Grand Am, Achieva
Sun Roof Assembly Malibu, Cutlass
Saturn............... Deck Lid Passenger Sport Coupe
Pillar Reinforcement Sport Coupe
Inner Door Panel Sport Coupe
Window Frame Reinforcement Sport Coupe
Body Side Inners Innovate (1999 Launch)
Door Assemblies Innovate (1999 Launch)
Shelf Panel Innovate (1999 Launch)
Wheel House Inner Innovate (1999 Launch)
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CUSTOMER COMPONENT TYPE MODEL/PLATFORM
- -------- --------- ---- --------------
Ford................. Rear Floor Reinforcement Sport Utility Explorer/Mountaineer
Reinforced Center Body Pillar Explorer/Mountaineer
Rear Seat Back/Floor Assembly Explorer/Mountaineer
B-Pillar Assembly Explorer/Mountaineer
A-Pillar Assemblies Light Trucks Ranger/Mazda
Upper/Lower Back Panels Ranger/Mazda
Back Panel Inside Upper Ranger/Mazda
Roof Panel Assembly Ranger/Mazda
Windshield Header Ranger/Mazda
Box Side Outers Mazda
Load Floors F-Series (250/350 Supercab)
Rear Floor Cargo Assemblies Vans/Mini-Vans Windstar
Dash Panels Windstar
Rear Crossmembers Econoline
Cowl Side Windstar/Econoline/Aerostar
Radiator Supports Windstar (1999 Model)
Roof Rails Econoline
A-Pillar Inners Econoline
Floor Pans Econoline/Windstar
Shock Towers Econoline
Fuel Filler Doors Econoline
Ford................. Control Arms-Front & Rear Passenger Cars Contour/Mystique/Mondeo
(Europe)
Rear Suspension Bar Assembly Contour/Mystique/Mondeo
(Europe)
A-Pillar Assemblies Mustang/Thunderbird/Cougar/
Mark VIII
Pillar Inners Town Car
Frame Rails Mustang
CAMI................. Rear Bumper Sport Utility Geo Tracker/Suzuki Sidekick
Side Frame Member Geo Tracker/Suzuki Sidekick
(Front/Rear)
Door Inner Reinforcement Geo Tracker/Suzuki Sidekick
Floor Bar Geo Tracker/Suzuki Sidekick
Various Underbody Components Geo Tracker/Suzuki Sidekick
Rear Cross Members Passenger Cars Geo Metro/Suzuki Swift
Side Sill Geo Metro/Suzuki Swift
Dash Panel Geo Metro/Suzuki Swift
DESIGN AND ADVANCED ENGINEERING
The Company strives to maintain a technological advantage through
investment in product development and advanced engineering capabilities that
utilize structured program management techniques in an effort to exceed the
customer's expectations for value and service. The Company's engineering staff
encompasses such disciplines as program management, computer aided design
("CAD"), advanced engineering, manufacturing feasibility, and tooling and
process development. Responsibilities of the Company's engineers include (i)
design, (ii) initial prototype development, (iii) design and implementation of
manufacturing processes, (iv) production feasibility and improvement, and (v)
data management.
As the Company's customers continue to outsource larger assembled systems
which must be designed at earlier stages of vehicle development rather than the
smaller parts which are attached to them, the Company is increasingly required
to utilize advanced engineering resources early in the planning process.
Advanced
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engineering resources create improved engineering design, CAD feasibility
studies, working prototypes and testing programs to meet customer
specifications. Given this increased demand for early involvement in the design
and engineering aspects of production development, the Company established a new
technical center which houses its engineering and design group. The Company
utilizes structured program management based on the Automotive Industry Action
Group sanctioned Advanced Part Quality Planning principles to ensure part
quality in all phases of design and manufacturing. The Company has established a
data management and CAD department which is able to support all major customer
systems. The Company provides "gray box" engineering capabilities in which the
customer has principal design responsibility while the Company's engineers work
closely with the customer in designing the specifications of the product
material, the part to be produced and the tooling required to produce the
finished product. The Company is also on-line with all major customers which
accelerates the process of design changes.
The Company's design and advanced engineering expertise is an important
differentiating factor in maintaining its relationships with and obtaining new
business from Ford and GM and, in management's judgment, was an essential factor
in winning the Innovate Program business.
CUSTOMERS AND MARKETING
The Company supplies its products on a long-term preferred and sole source
basis, primarily to GM (56.0%), Ford (33.0%), CAMI (3.0%), and Saturn (2.8%)
(percentages are approximates of net sales for the fiscal year ended as of March
31, 1997 on a pro forma basis for the Lobdell acquisition) with the remaining
net sales comprised of sales primarily to other automotive suppliers. The
Company has been providing products directly to GM and Ford for more than 50
years. The Company has been shipping products to GM de Mexico from its
operations in the United States for several years, and during 1997, at the
request of GM de Mexico, the Company will begin manufacturing and assembling
components for GM de Mexico from facilities to be established in Mexico. The
Company believes its presence in Mexico is strategically important and may lead
to several significant new opportunities with GM de Mexico and other OEMs doing
business in Mexico. The Company maintains very strong relationships with its
customers and continually strives to exceed customer expectations and anticipate
customer needs. This approach has enabled the Company to maintain its status as
a long-term supplier with each of its major customers and as part of a limited
group of preferred suppliers invited to bid for platform work.
With the efforts by the OEMs to reduce the product development cycle time,
top suppliers are increasingly included in the early design and development
stages. For example, the Company obtains many of its new orders through a
presourcing process by which the customer invites one or a few preferred
suppliers to manufacture and design a component, assembly or module that meets
certain price, timing and functional parameters. Upon selection at the
development stage, the Company and the customer typically agree to cooperate in
developing the product to meet the specified parameters. Upon completion of the
development stage and the award of the manufacturing business, the Company
receives a blanket purchase order for those components, assemblies or modules
for the life of a vehicle model or platform, which typically range from five to
seven years. Consequently, the key success factors for OEM suppliers now include
total program management that encompasses state-of-the-art design, manufacture
and delivery of high quality products at competitive prices.
The advanced engineering and sales organization at the Company's technical
center offers services few other suppliers have available for their customers.
The group's primary activities are: (i) Quoting/Cost Estimating; (ii)
Assembly/Automation; (iii) CAD Design and Data Control; (iv) Tool
Process/Design; and (v) Program Management. The sales group is divided into
customer oriented business units, each with a business unit manager responsible
for all facets of customer needs, as well as strategies for growing their
particular customer base. The entire group is dedicated to advanced technical
development and servicing a multitude of customers' needs as one team.
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MANUFACTURING AND FACILITIES
The Company's corporate headquarters, engineering, technical center and
sales offices are currently located in Bloomfield Hills, a suburb of Detroit,
Michigan, close to its core of automotive customers. The Company's eight
manufacturing plants are strategically located in Indiana, Tennessee, Michigan,
and Ontario, Canada near OEM manufacturing sites. These manufacturing plants
aggregate approximately 1.9 million square feet in size and are all
Company-owned. In addition, the Company intends to lease manufacturing and
assembly facilities in Mexico in connection with the recent award of business
from GM de Mexico.
The Company operates over 200 presses ranging from under 100 ton to 2,500
ton capabilities. The Company is capable of producing components and assemblies
from the smallest brackets to full-size, Class A door and closure panels with
its unique wide-bed (180 inch), automated press lines. Production systems
include oil feeders, welding robots, pick and place robots and other
state-of-the-art automation, as well as autophoretic corrosion resistant coating
systems.
As OEMs have increased quality standards and implemented just-in-time and
sequenced delivery/inventory management methods, the consistency of quality, as
well as the timeliness and reliability of shipments by OEM suppliers, have
become crucial in meeting logistical demands of the OEMs and reducing operating
costs of the supplier. The Company has responded by developing and adopting
manufacturing practices that seek to maximize quality and eliminate waste and
inefficiency in its own operations and in those of its customers. The Company's
manufacturing and engineering capabilities enable it to design and build
high-quality, efficient manufacturing systems, processes and equipment. The
Company has invested heavily in its commitment to quality through education of
employees and implementation of cost management and control systems from the
plant floor up.
All suppliers are required to meet numerous quality standards in order to
qualify as a preferred and long-term supplier to the OEMs. The QS-9000 standards
were developed by international and domestic automobile and truck manufacturers
to ensure that their suppliers meet consistent quality standards that can be
independently audited. Ford and GM require that all suppliers be certified
QS-9000 by the end of 1997 and the Company is scheduled to meet that
requirement. The Company has the Q1 rating from Ford at 4 of the 5 plants which
have Ford as a customer. Since the acquisition of Lobdell, the Company has
initiated steps necessary to obtain the Q1 rating at the fifth plant which
management expects to obtain by August 1997.
As part of its full-service supplier development program, the Company is
also undergoing the process of becoming certified by Ford as a Full-Service
Supplier. This certification process, conducted by Ford, ensures that a
Full-Service Supplier meets various Ford requirements relating to quality
standards. The Company expects to be certified by Ford during 1997.
A summary of the Company's major facilities is set forth below:
SIZE PRIMARY
FACILITY (SQ. FT.) EXPERTISE PRODUCTS
-------- --------- --------- --------
Alma, Michigan.............. 389,000 Class A surfaces, large Radiator Supports, A-Pillars,
stampings and complex Floor Pans, Frame Rails, Deck
stampings and assemblies Lids
Argos, Indiana.............. 386,000 Class A surfaces, large Door Assemblies, Apertures,
panels, complex stampings Floor Panels, Roofs, A-Pillars
and assemblies
Corydon, Indiana............ 200,000 Difficult draw forming and Radiator Supports, A-Pillars,
complex stampings and Cowl Sides
assemblies
Greencastle, Indiana........ 214,000 Large stampings, complex Radiator Supports, A-Pillars,
stampings and assemblies, Seat Backs, Control Arms
autophoretic corrosion
resistant coating
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SIZE PRIMARY
FACILITY (SQ. FT.) EXPERTISE PRODUCTS
-------- --------- --------- --------
Winchester, Indiana......... 185,000 High strength, low-alloy Rocker Panels, various
material, deep draw forming structural components
and complex stampings and
assemblies
Cambridge, Ontario.......... 290,000 Complex assemblies and Radiator Supports, Control
large stampings Arms, Door Inners, A-Pillars
Delhi, Ontario.............. 115,000 High strength, low-alloy Rocker Panels, Control Arms,
material, complex stampings Cross Members
and assemblies
Athens, Tennessee........... 100,000 Welding, painting and Structural steel shipping
assembly racks and containers
Bloomfield Hills,
Michigan(1)............... Executive Offices, Sales,
Marketing and Advanced
Engineering
- -------------------------
(1) All properties above are owned, with the exception of the Bloomfield Hills
office. This office is leased for a five-year term ending July 31, 2000 and
requires a monthly rent of $8,580. The Company expects to relocate its
Executive, Sales, Marketing and Engineering Staffs within the metropolitan
Detroit area during 1997.
RAW MATERIALS
The cost of raw materials represented approximately 53.0% of net sales of the
Company for the fiscal year ended March 31, 1997 on a pro forma basis for the
Lobdell acquisition. On an annual basis, steel represents approximately 77.0% of
total raw materials purchases. The Company expects to purchase nearly 260,000
tons of steel in fiscal 1998 for use in its production. The remaining 23.0% of
raw materials purchases is represented by various purchased parts such as
forgings, bushings, ball joints, isolators, corrosion resistant coating, and
various fasteners.
The Company participates in steel purchase programs through Ford and GM
wherein the steel is purchased by the OEM from the steel mill and sold to the
Company at a negotiated price. These purchase programs effectively neutralize
the exposure to steel price increases, as any price increases from the steel
mills are either absorbed by the OEM prior to the Company's purchase of the
steel or such increases are reflected in the Company's purchase of the steel and
passed back to the OEM in the product pricing. The Company currently
participates in such a steel purchase program with Ford for substantially all of
its Ford steel requirements and its Canadian operations participate in such a
program with GM. The Company expects that substantially all of its GM steel
requirements will be covered by the GM steel purchase program by December 1997.
COMPETITION
The market for the Company's products is characterized by strong
competition from both captive OEM suppliers and external, non-captive suppliers.
The Company competes with a limited number of competitors that have the physical
assets and technical resources to produce large bed stampings, complex parts and
subassemblies of multiple parts. The Company's largest competitors include The
Budd Company, a subsidiary of Thyssen AG; Magna International Inc.; Tower
Automotive, Inc.; Aetna Industries, Inc.; Ogihara America Corp., a subsidiary of
Marubeni Corp.; Midway Products Corporation; Active Tool & Manufacturing Co.,
Inc.; A.G. Simpson Automotive, Inc.; Mayflower Vehicle Systems Inc.; L&W
Engineering; National Automotive Radiator Manufacturing Company; and divisions
of OEMs with internal stamping and assembly operations.
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The Company competes for business at the beginning of the development for
new model platforms, as well as the redesign of current models. This process can
begin from two to five years prior to the introduction of the new model. After
the customer awards a program, that supplier is generally designated as the sole
source supplier for the life of that program, which typically lasts 4 to 5 years
for passenger cars and up to 10 years for trucks (particularly for unexposed
structural components and assemblies).
EMPLOYEES
At March 31, 1997, the Company employed approximately 2,100 persons in the
United States and Canada, approximately 470 of whom are employed on a salaried
basis and the balance of whom are hourly employees. Substantially all of the
hourly employees are represented by unions. In the United States, substantially
all of the Company's hourly workers are represented by the UAW through
collective bargaining agreements with six local unions. These individual
agreements which are from three to five years in length expire over the period
March 1998 through January 2000. The agreement with the UAW for the Argos,
Indiana facility is currently scheduled to expire on March 31, 1998 and the
Company expects to enter into early negotiations regarding the UAW contract at
the Argos plant. As of March 31, 1997, substantially all of the Company's hourly
Canadian employees were represented by the CAW. The agreement with the CAW for
the Cambridge, Ontario facility is currently scheduled to expire on September
30, 1997. The Company and the CAW have entered into early negotiations regarding
the CAW contract at the Cambridge plant.
The Company has not experienced any organized work stoppages at any time
during the past ten years. At the present time, the Company believes that its
relations with its employees are good.
REGULATORY MATTERS
The Company's facilities and operations are subject to a wide variety of
federal, state, local, and foreign environmental laws, regulations, and
ordinances, including those related to air emissions, wastewater discharges, and
chemical and hazardous waste management and disposal ("Environmental Laws"). The
Company's operations also are governed by laws relating to workplace safety and
worker health, primarily the Occupational Safety and Health Act, and foreign
counterparts to such laws. In many jurisdictions, these laws are complex and
change frequently. The nature of the Company's operations exposes it to risks of
liabilities or claims with respect to environmental and worker health and safety
matters. There can be no assurance that material costs will not be incurred in
connection with such liabilities or claims.
Based on the Company's experience to date, the Company believes that the
future cost of compliance with existing Environmental Laws (or liability for
known environmental claims) will not have a material adverse effect on the
Company's business, financial condition or results of operations. However,
future events, such as changes in existing Environmental Laws or their
interpretation, may give rise to additional compliance costs or liabilities that
could have a material adverse effect on the Company's business, financial
condition or results of operations. Compliance with more stringent Environmental
Laws, as well as more vigorous enforcement policies of regulatory agencies or
stricter or different interpretations of existing Environmental Laws, may
require additional expenditures by the Company that may be material.
Certain Environmental Laws hold current owners or operators of land or
businesses liable for their own and for previous owners' or operators' releases
of hazardous or toxic substances, materials or wastes, pollutants or
contaminants, including petroleum and petroleum products ("Hazardous
Substances"). Certain laws, including but not limited to CERCLA, may impose
joint and several liability on responsible parties. Because of the Company's
operations, the long history of industrial uses at some of its facilities, the
operations of predecessor owners or operators of certain of the businesses, and
the use, production, and releases of Hazardous Substances at these sites, the
Company is affected by such liability provisions of the Environmental Laws.
Several of the Company's facilities have experienced some level of regulatory
scrutiny in the past and are or may be subject to further regulatory
inspections, future requests for investigation or liability for past disposal
practices.
The Company's Alma, Michigan plant is listed on the Michigan Department of
Environmental Quality ("MDEQ") list of Michigan Sites of Environmental
Contamination. Based on filings with the MDEQ by the
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current owner of the petroleum refinery which adjoins the Alma Plant property,
the refinery has been determined by the MDEQ to be the source of certain
contamination existing in the eastern area of the Alma plant property. While the
Company is currently conducting certain remedial activity at its Alma plant in
connection with this contamination, the Company may have claims against the
refinery owner relating to this contamination. While the Company does not expect
to incur significant future costs in connection with this matter, the Company
cannot guarantee that such future costs will not be material.
The Resource Conservation and Recovery Act and the regulations thereunder
("RCRA") regulates the generation, treatment and disposal of hazardous wastes.
In the mid-1980s, the Company, through Lobdell, entered into a Consent Agreement
and Final Order with the United States Environmental Protection Agency (the
"EPA") relating to the final closure of a surface water impoundment area at the
Alma plant under RCRA. The Company has remediated the impoundment soils and
sediments and is now implementing a groundwater monitoring program with EPA
approval under RCRA. In addition, the Company is conducting groundwater
monitoring in a separate section of the Alma plant at which contaminants have
been detected by the Company's consultants. Both of these programs may be
affected by the suspected contamination from the petroleum refinery described
above. While future groundwater remediation costs, if any, are not expected to
be material, the Company cannot predict such costs with certainty and no
guarantee can be made that these costs will not be material.
The Company has been named as a potentially responsible party, along with
several other companies, in connection with a former disposal facility located
in the St. Louis, Michigan area. The Company and certain other named parties, in
cooperation with the State of Michigan, currently are undertaking a remedy for
which they are sharing costs. Groundwater at the site is currently being
monitored and while the costs of groundwater remediation, if any, are not
expected to be material, the Company cannot accurately estimate such costs at
this time. See "Risk Factors -- Environmental Risks."
LEGAL PROCEEDINGS
The Company is subject to various claims, lawsuits and administrative
proceedings related to matters arising in the normal course of business. In the
opinion of management, after reviewing the information which is currently
available with respect to such matters and consulting with legal counsel, any
liability which may ultimately be incurred with respect to these matters will
not materially affect the financial position of the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of the
directors and executive officers of Oxford Automotive. Each director of Oxford
Automotive will hold office until the next annual meeting of shareholders or
until his successor has been elected and qualified. Officers of Oxford
Automotive serve at the discretion of the Board of Directors.
NAME AGE POSITIONS
---- --- ---------
Selwyn Isakow............................. 45 Chairman of the Board of Directors
Rex E. Schlaybaugh, Jr. .................. 48 Vice Chairman of the Board of
Directors and Secretary
Steven M. Abelman......................... 46 Director, President and Chief
Executive Officer
Manfred J. Walt........................... 44 Director
Donald C. Campion......................... 48 Senior Vice President-Chief
Financial Officer
Lawrence C. Cornwall...................... 50 Senior Vice President-Sales and
Engineering
John H. Ferguson.......................... 49 Vice President-Financial Operations
and Assistant Secretary
Selwyn Isakow, Chairman of the Board of Directors. Mr. Isakow has been the
President and a director of Oxford Automotive since its inception in 1995 and
was appointed Chairman of the Board in May 1997. Since 1985, Mr. Isakow has been
the President of The Oxford Investment Group, Inc. ("Oxford Investment"), a
private investment and corporate development company that acquires majority
equity positions on behalf of its principals in industrial products
manufacturing, financial services, niche distribution and other selected
companies. Mr. Isakow generally serves as Chairman of the Board and a director
of all such portfolio companies. Mr. Isakow is also a director of Champion
Enterprises, Inc. and Ramco Gershenson Properties Trust, and serves on the
boards of numerous community organizations. From 1982 to 1985, Mr. Isakow was
the Executive Vice President of Comerica Incorporated, a regional bank holding
company, and from 1978 to 1982, was a principal at Booz, Allen and Hamilton,
management consultants.
Rex E. Schlaybaugh, Jr., Vice Chairman of the Board of Directors and
Secretary. r. Schlaybaugh has been the Secretary and a director of Oxford
Automotive since its inception in 1995 and was appointed Vice Chairman of the
Board in May 1997. Mr. Schlaybaugh was appointed the Vice Chairman of Oxford
Investment in May 1997. Mr. Schlaybaugh has been a member of the firm of Dykema
Gossett PLLC since 1985. Mr. Schlaybaugh is also a director of certain other
portfolio companies of Oxford Investment. Mr. Schlaybaugh is currently the
Chairman of the Board of Trustees of Oakland University.
Steven M. Abelman, Director, President and Chief Executive Officer. Mr.
Abelman was appointed President and Chief Executive Officer of Oxford Automotive
in May 1997. Prior to joining Oxford Automotive, Mr. Abelman was Deputy Chief
Executive Officer of Bundy North America ("Bundy"), an automotive supplier of
brake and fuel delivery systems, from February 1996 until May 1997 and prior to
that he was President of Bundy from September 1995 until February 1996. From
December 1991 to September 1995, Mr. Abelman was Vice President and General
Manager of Augat Wiring Systems, a manufacturer of automotive wiring systems and
components.
Manfred J. Walt, Director. Mr. Walt has been a director of Oxford
Automotive since May 1997. Mr. Walt has been the Managing Partner-Financial
Services of the Edper Group Limited ("Edper"), a diversified Canadian Merchant
Bank with operations in natural resources, power generating, financial services
and real estate, since 1989. From 1980 to 1989, Mr. Walt served in various
capacities with Edper. Mr. Walt is
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the Chairman of Consolidated Canadian Express Limited and Consolidated Enfield
Limited, merchant banking affiliates of Edper.
Donald C. Campion, Senior Vice President-Chief Financial Officer. Mr.
Campion was appointed Senior Vice President-Chief Financial Officer of Oxford
Automotive in July 1997. From June 1996 to March 1997, Mr. Campion was the
Senior Vice President and Chief Financial Officer at Delco Electronics
Corporation. From November 1993 to May 1996, Mr. Campion was the Chief Financial
Officer for the services parts division of GM, and from August 1992 to October
1993 was the Financial Director of Performance Analysis for the North American
Operations of GM.
Lawrence C. Cornwall, Senior Vice President-Sales and Engineering. Mr.
Cornwall was appointed Vice President-Sales and Engineering of Oxford Automotive
in May 1997. From October 1995 to May 1997, Mr. Cornwall was the Senior Vice
President-Sales and Engineering at BMG. From 1991 to 1995, Mr. Cornwall was Vice
President of Sales and Engineering at Veltri International, an automotive
stamper.
John H. Ferguson, Vice President-Financial Operations and Assistant
Secretary. Mr. Ferguson was appointed as a Vice President-Financial Operations
and Assistant Secretary of Oxford Automotive in May 1997. Mr. Ferguson is also
the Chief Financial Officer of BMG, a position he has held since April 1996.
Prior to that time, Mr. Ferguson was with Bundy, where he acted as Group Plant
Manager from 1994 to 1996 and as Corporate Controller from 1992 to 1994. From
1984 to 1992, Mr. Ferguson held several positions with GenCorp. Inc., an
automotive tire supplier, including Controller of the Automotive Products Group.
Certain of the officers and directors of Oxford Automotive are also
directors or officers of Oxford Automotive subsidiaries.
DIRECTOR COMPENSATION AND ARRANGEMENTS
Directors do not currently receive compensation for their services as
directors. However, the Company intends to pay fees to its non-employee
directors and to reimburse the out-of-pocket expenses related to directors'
attendance at each Board and committee meeting. In addition, the Company may
elect to adopt a non-employee director option plan or other similar plan to
provide for grants of stock options or other benefits as a means of attracting
and retaining highly qualified independent directors for the Company. Members of
the Board of Directors are elected pursuant to certain shareholder agreements by
and among the Company and certain of its shareholders. See "Principal
Shareholders -- Shareholder Agreements."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a Compensation Committee. All determinations with
respect to executive compensation are made by the Board of Directors. During the
last completed fiscal year, Messrs. Isakow and Schlaybaugh participated in
deliberations of the Company's Board of Directors concerning executive officers
compensation. See "Certain Transactions."
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EXECUTIVE COMPENSATION
The following table sets forth certain information as to the compensation
earned by the Company's Chief Executive Officer and the Company's four other
most highly paid officers (the "Named Executive Officers") for the last three
fiscal years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1)
---------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND TITLE YEAR SALARY BONUS COMPENSATION COMPENSATION
-------------- ---- ------ ----- ------------ ------------
Selwyn Isakow,............................. 1997 $ -- $ -- $-- $--
Chairman(2)
Donald C. Campion,......................... 1997 -- -- -- --
Senior Vice President --
Chief Financial Officer(3)
Lawrence C. Cornwall,...................... 1997 124,196 -- -- --
Senior Vice President -- 1996 31,504 24,200 -- --
Sales and Engineering(4)
John H. Ferguson,.......................... 1997 101,250 -- -- --
Vice President --
Financial Operations and Assistant
Secretary(5)
- -------------------------
(1) The Company was formed in October 1995 and, other than as disclosed in the
table above, executive officers of the Company have not received any
compensation.
(2) Mr. Isakow was the President of the Company from its inception until May
1997, during which time he did not receive any compensation from the
Company. Steven M. Abelman was appointed President and Chief Executive
Officer in May 1997. See "-- Employment Agreements."
(3) Mr. Campion was appointed Senior Vice President-Chief Financial Officer of
Oxford Automotive in July 1997. See "-- Employment Agreements."
(4) Mr. Cornwall joined the Company in October 1995 and received compensation
from the Company for a full fiscal year only in 1997.
(5) Mr. Ferguson joined the Company in April 1996 and thus did not receive
compensation from the Company for the full 1997 fiscal year.
EMPLOYMENT AGREEMENTS
As of May 1, 1997, Oxford Automotive and Steven M. Abelman entered into an
Employment and Noncompetition Agreement. The agreement provides that Mr. Abelman
will serve as President and Chief Executive Officer of Oxford Automotive on an
"at-will" basis. The agreement provides that Mr. Abelman will receive an annual
salary of $250,000, will be eligible to receive a bonus of up to 60% of his
salary as determined by the Board of Directors of Oxford Automotive, and will be
entitled to certain fringe benefits. Mr. Abelman has also agreed not to compete
with the Company during the period of his employment and for two years following
the termination of his employment. Upon the termination of his employment
without cause, Mr. Abelman is entitled to severance payments equal to (a) his
annual base salary, if such termination is prior to May 1, 1999 or (b) 1.5 times
his annual base salary, if such termination is after May 1, 1999.
On November 24, 1995, BMG and Larry C. Cornwall entered into an Employment
Agreement. The agreement provides that Mr. Cornwall will serve as Senior Vice
President-Sales and Marketing of BMG on an "at-will" basis. Mr. Cornwall has
subsequently been appointed as Senior Vice President-Sales and Engineering of
Oxford Automotive. The agreement provides that Mr. Cornwall will receive an
annual salary of $120,000, will be eligible to receive a bonus of up to 50% of
his salary as determined by the Board of Directors
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of BMG, will be eligible to participate in the Company's profit sharing plan,
and will be entitled to certain fringe benefits. Upon the termination of the
agreement, Mr. Cornwall will be entitled to continue to receive his base salary
for the longer of three months or the Canadian statutory requirement.
As of July 21, 1997, Oxford Automotive and Donald C. Campion entered into
an Employment and Noncompetition Agreement. The agreement provides that Mr.
Campion will serve as Senior Vice President -- Chief Financial Officer of Oxford
Automotive on an "at-will" basis. The agreement provides that Mr. Campion will
receive an annual salary of $210,000, will be eligible to receive a bonus of up
to 50% of his salary as determined by the Board of Directors of Oxford
Automotive, and will be entitled to certain fringe benefits. Mr. Campion has
also agreed not to compete with the Company during the period of his employment
and for two years following the termination of his employment. Upon termination
of his employment without cause, Mr. Campion is entitled to a severance payment
of 50% of his annual base salary, payable over six months, plus the continuation
of certain benefits during this six-month period.
See also "Certain Transactions -- Management Agreements."
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PRINCIPAL SHAREHOLDERS
As of July 21, 1997, there were 309,750 issued and outstanding shares of
the Common Stock, without par value, of the Company (the "Common Stock"). The
following table sets forth information as of July 21, 1997 with respect to the
Common Stock beneficially owned by each director of the Company, the Named
Executive Officers, all directors and executive officers of the Company as a
group, and by other holders known to the Company as having beneficial ownership
of more than 5% of the Common Stock. Selwyn Isakow and the Company's other
shareholders have entered into certain agreements, each of which contain
substantially identical terms, the result of which gives Mr. Isakow voting
control of 100% of the Company's Common Stock, except under certain
circumstances. See "-- Shareholder Agreements." Unless otherwise specified, the
address for each person is 2000 North Woodward Avenue, Suite 130, Bloomfield
Hills, Michigan 48304.
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS
------------------------------------ --------- ----------
Selwyn Isakow (1)......................................... 151,474 48.9%
Robert H. Orley........................................... 23,180 7.5%
Rex E. Schlaybaugh, Jr.................................... 12,900 4.2%
Steven M. Abelman (2)..................................... 12,326 4.0%
2365 Franklin Road
Bloomfield Hills, MI 48203
Manfred J. Walt........................................... 1,500 *
Suite 4440 BCE Place
181 Bay Street
Toronto, Ontario, Canada M5J 2T3
Donald C. Campion (2)..................................... 4,000 1.3%
2365 Franklin Road
Bloomfield Hills, MI 48203
John H. Ferguson.......................................... 6,180 2.0%
2365 Franklin Road
Bloomfield Hills, MI 48203
Larry C. Cornwall......................................... 7,000 2.3%
2365 Franklin Road
Bloomfield Hills, MI 48203
Gregg L. Orley............................................ 21,840 7.1%
All directors and officers as a group (7 persons)
(1)(2).................................................. 195,380 63.1%
- -------------------------
* Less than 1.0%
(1) Includes 135,874 shares owned by Hilsel Investment Company Limited
Partnership, of which Tridec Management, Inc. is General Partner. Mr. Isakow
is the President and a shareholder of Tridec Management, Inc. In addition,
Mr. Isakow may be deemed to be the beneficial owner of all of the
outstanding shares of Common Stock as a result of certain voting power over
such shares pursuant to the shareholder agreements described below and
certain purchase options that may be exercised by Mr. Isakow with respect to
60,470 outstanding shares of Common Stock.
(2) Each of Mr. Abelman's and Mr. Campion's Employment and Noncompetition
Agreement with Oxford Automotive provides Oxford Automotive with the right
to repurchase their respective shares of Common Stock if their employment is
terminated for any reason.
SHAREHOLDER AGREEMENTS
Each holder of Common Stock is a party to a shareholder agreement which
provides for certain restrictions on transfer by shareholders and grants certain
other shareholders the option to purchase the shares
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of a shareholder upon his death. The agreements also provide that each
shareholder will grant a proxy to Mr. Isakow to vote all of the shareholder's
shares at any meeting of the Company; provided, however, that if holders of
shares having a majority in interest of the shares of Common Stock determine
that it is in the best interest of all of the shareholders to sell all or
substantially all of the assets of the Company or to cause the Company to merge
or consolidate with or into another corporation, Mr. Isakow shall exercise the
proxies provided to him consistent with that decision. As a result, except as
described above, Mr. Isakow has voting control of 100% of the Company's Common
Stock.
CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENTS
Oxford Investment is a private investment and corporate development company
which is controlled by Mr. Isakow. At the time the Company acquired Lobdell,
Oxford Investment and Lobdell entered into an agreement (the "Lobdell
Agreement") whereby Oxford Investment agreed to perform various consulting,
management, and advisory services on behalf of Lobdell with respect to all
matters relating to or affecting Lobdell's business. Lobdell paid Oxford
Investment an investment banking fee of $300,000 on the date the Company
acquired Lobdell and paid Oxford Investment a management fee of $300,000 per
year. This agreement was terminated upon completion of the Offering. At the time
the Company acquired BMG, Oxford Investment and BMG entered into an agreement
(the "BMG Agreement") whereby Oxford Investment agreed to perform certain
management services for BMG. BMG paid Oxford Investment an investment banking
fee of $200,000 on the date the Company acquired BMG and paid Oxford Investment
a management fee of $200,000 per year. This agreement was also terminated upon
completion of the Offering. Mr. Schlaybaugh is the Vice Chairman of Oxford
Investment.
The Company entered into a new management agreement with Oxford Investment
upon the termination of the Lobdell Agreement and the BMG Agreement. Pursuant to
the terms of this management agreement, Oxford Investment will perform various
consulting, management and financial advisory services on behalf of the Company.
The Company will pay Oxford Investment a monthly management fee of $83,334 and
will pay an investment banking fee, for acquisitions of $2.5 million or more, of
1.0% or 1.25% (for acquisitions outside of North America) of the aggregate
acquisition cost for advice and assistance in connection with such acquisition,
with a minimum fee of $200,000. No investment banking fee will be paid to Oxford
Investment in connection with acquisitions for aggregate consideration of less
than $2.5 million. The initial term of the agreement will end on December 31,
2001, but will automatically extend for additional one-year periods thereafter
unless either party terminates the agreement. In addition, pursuant to the
management agreement, Oxford Investment will license to the Company the name
"Oxford Automotive" which is owned by Oxford Investment.
OTHER TRANSACTIONS
As of March 31, 1997, Mr. Abelman issued a note to the Company in
connection with his acquisition of shares of the Company's Common Stock. The
principal amount of the note was $130,000 and the note bears interest at the
prime rate plus 1.0%, which rate is adjusted on March 31 of each year to reflect
the then current prime rate. Principal and interest on the note is payable in
equal annual installments with interest on the unpaid principal, with the final
payment due May 31, 2002.
As of March 31, 1997, the Company issued a subordinated demand note to Mr.
Robert H. Orley in connection with the redemption of certain shares of the
Company's Common Stock. The principal amount of the note was $108,203 and was
paid in full subsequent to March 31, 1997.
RPI, Inc. ("RPI"), a Michigan corporation controlled by the principal
shareholder of the Company, issued demand notes to Lobdell in the principal
amounts of $250,000, $100,000, $150,000, $200,000, and $300,000, respectively,
on May 2, 1997, May 21, 1997, June 6, 1997, June 30, 1997, and July 11, 1997,
each bearing interest at the prime rate plus 1.0% per annum. The Company has
agreed to extend credit to RPI up to a maximum of $1.7 million.
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LEGAL
Rex E. Schlaybaugh, Jr. is a shareholder, the Vice Chairman of the Board
and a director of the Company. Dykema Gossett PLLC, of which Mr. Schlaybaugh is
a member, has performed legal services for the Company since its inception,
including services performed in connection with this Offering. The Company
expects to continue to retain the firm as general counsel after the Exchange
Offer.
DESCRIPTION OF CERTAIN
INDEBTEDNESS AND PREFERRED STOCK
SENIOR CREDIT FACILITY
General. In connection with the Offering, on June 24, 1997, the Company
entered into a credit agreement with NBD Bank, on behalf of itself and as agent
for a syndicate of other lenders, providing for up to $110.0 million (the
"Commitment Amount") of revolving credit availability including the issuance of
letters of credit (the "Senior Credit Facility"). The Company and each principal
operating subsidiary (the "Senior Credit Obligors") are parties to or guarantors
of the Senior Credit Facility. The obligations under the Senior Credit Facility
(the "Obligations") are secured by a first lien on substantially all the assets
of the Senior Credit Obligors. The Obligations and guaranties of the Senior
Credit Obligors (the "Senior Credit Guaranties") will rank senior to all other
indebtedness of the Company, including the Notes. Availability under the
revolver at March 31, 1997 would have been approximately $101.0 million, reduced
for the effect of a Letter of Credit issued for the IRB's (as defined). Funds
under the Senior Credit Facility are available for general corporate purposes
(including acquisitions) and letters of credit.
Interest Rates. Interest on outstanding borrowings under the Senior Credit
Facility is payable monthly and accrues at an annual rate equal to (a) the
Applicable Margin (as defined in the Senior Credit Facility) plus either (i) the
higher of the Prime Rate (as defined in the Senior Credit Facility) or 0.5% over
the Federal Funds Rate or (ii) with respect to Canadian based borrowings, the
higher of the prime rate of First Chicago NBD Bank, Canada or 0.5% over the BA
Rate (the one month bankers' acceptance rates, as further defined in the Senior
Credit Facility), or (b) the London Interbank Offered Rate plus the Applicable
Margin (a "LIBOR-based Rate") or, with respect to Canadian based borrowings, the
BA Rate. The Applicable Margin will be based upon the Company's trailing four
quarter Ratio of Total Debt to EBITDA (as defined in the Senior Credit Facility)
as follows:
RATIO OF
TOTAL FUNDED DEBT APPLICABLE MARGIN
TO EBITDA PRIME/LIBOR
- ----------------- -----------------
>5.00 .75%/2.25%
4.51--5.00 .50%/2.00%
3.76--4.50 .25%/1.75%
3.01--3.75 0%/1.50%
<=3.00 0%/1.25%
Maturity and Optional Prepayments. All borrowings under the Senior Credit
Facility mature in June 2003, and the aggregate principal amount outstanding may
not exceed the Commitment Amount at any time. Borrowings under the Senior Credit
Facility may be prepaid at any time without premium or penalty, except that any
prepayment of a LIBOR-based Rate loan that is made prior to the end of the
applicable interest period shall be subject to reimbursement of breakage costs.
Covenants. The Senior Credit Facility contains certain customary covenants,
including without limitation, reporting and other affirmative covenants;
financial covenants, including ratio of total debt to EBITDA, net worth, fixed
charge coverage ratio, interest coverage ratio (each as defined in and
calculated pursuant to the Senior Credit Facility); and negative covenants,
including restrictions on incurrence of other indebtedness, payment of cash
dividends and other distributions to shareholders, liens in favor of parties
other than the lenders under the Senior Credit Facility, certain guaranties of
obligations of or advances to others, sales of
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material assets not in the ordinary course of business, restrictions on mergers
and acquisitions, and capital expenditures.
Events of Default. The Senior Credit Facility contains customary events of
default including non-payment of principal, interest or fees; violation of
covenants; inaccuracy of representations or warranties; cross-defaults to
certain other indebtedness and bankruptcy.
Fees. The Company will pay, on a quarterly basis, a per annum fee on the
unused Commitment Amount ranging from 0.25% to 0.50% and letter of credit fees
ranging from 1.25% to 2.25%, in each case based on certain financial ratios of
the Company.
BMG INDEBTEDNESS
The Canadian Department of Regional Industrial Expansion has provided a
term loan (the "IRDP Loan") to BMG, bearing interest at 6% with a final maturity
date of September 1, 2002. The IRDP Loan is unsecured. As of March 31, 1997,
$467,000 was outstanding with respect to the IRDP Loan.
The Export Development Corporation of Canada ("EDC") has provided a tooling
line facility to BMG (the "EDC Facility"), bearing interest at a fixed rate of
7.36%. The EDC Facility is secured by tooling at BMG relating to specific Saturn
contracts and has a final maturity of September 30, 1999. As of March 31, 1997,
$5.1 million was outstanding with respect to the EDC Facility.
LOBDELL INDEBTEDNESS
Lobdell, through Lewis Emery Capital Corporation, its wholly-owned
subsidiary, has been provided with a term loan facility from NBD Bank (the "LE
Loan"), bearing interest at 0.625% over 90-day LIBOR with a final maturity date
of October 1, 1998. This loan is collateralized by a purchase order from Ford,
which allows for recovery of the term-debt principal and interest,
administrative costs and a predetermined markup. As of March 31, 1997, $2.83
million was outstanding with respect to the LE Loan.
Lobdell, through its subsidiary Creative Fabrication Corporation
("Creative"), is financially obligated to the County of McMinn, Tennessee
pursuant to certain revenue bonds issued on behalf of Creative. On September 27,
1995, the Industrial Development Board of the County of McMinn issued $8.5
million of its Industrial Development Revenue Bonds ("IRBs") for the purpose of
lending the proceeds from the sale of the IRBs to Creative. The IRBs bear
interest at a variable rate which was 3.6% at March 31, 1997. The IRBs are
collateralized by a letter of credit issued by NBD Bank for the benefit of the
trustee under the indenture relating to the IRBs and by a mortgage on the
Creative facilities located in Tennessee and are guaranteed by Lobdell. Creative
is prohibited from paying, declaring or authorizing any dividend if there is an
event of default under the IRB documents. The IRBs mature in September 2010. As
of March 31, 1997, $8.3 million principal amount of IRBs were outstanding.
PREFERRED STOCK OF LOBDELL
In connection with the Company's acquisition of Lobdell, Lobdell issued
457,541 shares of its Series A $3.00 Cumulative Preferred Stock ( the "Series A
Preferred Stock") and 49,938 shares of its Series B Preferred Stock (the "Series
B Preferred Stock" and together with the Series A Preferred Stock the "Lobdell
Preferred Stock"), each having a stated value of $100 per share, and all of
which are outstanding. Generally, except as required by law, the holders of
Lobdell Preferred Stock have no voting rights. However, the holders of Series A
Preferred Stock, voting as a separate class, are entitled to elect (i) one
director of Lobdell, and (ii) if Lobdell fails to pay three consecutive
semi-annual dividend payments to the holders of Series A Preferred Stock, one
additional director until the payment default is cured. Dividends on the Series
A Preferred Stock accrue annually at the rate of $3.00 per share and are
cumulative, whether or not earned or declared. Lobdell may not declare or pay
any dividend or other distribution, other than in Lobdell Common Stock or other
stock junior to the Lobdell Preferred Stock ("Junior Stock"), with respect to
any Junior Stock unless all accrued, unpaid and current dividends with respect
to the Series A Preferred Stock have either been paid or sufficient funds have
been set apart for such payment. The Series B Preferred Stock is not entitled to
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receive any dividends. The Lobdell Preferred Stock has certain liquidation
preferences and the Series A Preferred Stock and Series B Preferred Stock rank
on a parity as to the receipt of such liquidation payments.
The Lobdell Preferred Stock is mandatorily redeemable by Lobdell on
December 31, 2006 at a price per share of $100, plus, with respect to the Series
A Preferred Stock, accrued and unpaid dividends to the date of redemption.
However, if the Company does not commence a public offering of its common stock
pursuant to a firm commitment underwritten offering prior to June 30, 2006, the
payment for the shares of Series A Preferred Stock to be redeemed will be $103
per share, plus accrued and unpaid dividends to the date of redemption. In
addition, at the option of the holders of Series A Preferred Stock, if the
Company does not commence such a public offering of its common stock on or
before December 31, 2001, Lobdell must redeem on December 31 of each year
commencing with 2002 up to 20% of the aggregate number of shares of Series A
Preferred Stock held by any such holder immediately prior to December 31, 2002.
In connection with the acquisition of Lobdell by the Company, the Company
has agreed to exchange its common stock for the shares of Series A Preferred
Stock upon the initial public offering ("Initial Public Offering") of its common
stock to the public which is exclusively for cash, subject to an effective
registration statement and underwritten on a firm commitment basis by one or
more underwriters. The holders of Series A Preferred Stock have the right to
exchange up to 50% or some lesser portion of their shares of Series A Preferred
Stock (the "Election Amount") for a number of shares of Company common stock
equal to (i) the Election Amount, multiplied by (ii) the Exchange Ratio (the
number equal to the redemption value of a share of Series A Preferred Stock,
divided by the price per share to the public of Company common stock in the
Initial Public Offering); provided, however, that, in the aggregate, holders of
Series A Preferred Stock may not receive more than 25% of the number of shares
of Company common stock registered pursuant to the Initial Public Offering.
Pursuant to the acquisition of Lobdell, the Company obtained various
indemnities for certain purchase price adjustments arising out of a closing
balance sheet and for claims relating to representations and warranties made by
the former common shareholders of Lobdell in connection with the acquisition. At
the closing of such acquisition, 100,000 shares of Series A Preferred Stock were
placed with an escrow agent to fund indemnification claims of the Company. The
Company and the preferred shareholders of Lobdell have settled certain
indemnification claims which has resulted in the cancellation of 60,000 shares
of Series A Preferred Stock and will also entail the cancellation of up to an
additional 40,000 shares of Series A Preferred Stock or, at the election of the
preferred shareholders of Lobdell (which must be made by August 31, 1997),
49,938 shares of Series B Preferred Stock.
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DESCRIPTION OF THE NOTES
GENERAL
The Old Notes were issued under an Indenture (the "Indenture") dated as of
June 15, 1997, among the Company, the Subsidiary Guarantors and First Trust
National Association, as Trustee (the "Trustee"). The terms of the Indenture
apply to the Old Notes and to the New Notes to be issued in exchange therefor
pursuant to the Exchange Offer (all such Notes are referred to herein
collectively as the "Notes").
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of which Indenture and the form of Notes is available upon request
to the Company. The following summary of certain provisions of the Indenture
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939, as amended. Capitalized terms used herein and not
otherwise defined have the meanings set forth in the section "-- Certain
Definitions." As used in this section, the term "Company" refers to Oxford
Automotive, Inc.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company, which, unless otherwise provided by the Company, will be the offices of
the Trustee. At the option of the Company, payment of interest may be made by
check mailed to the addresses of the Holders as such addresses appear in the
Note register.
The Notes are issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $160.0 million aggregate principal amount (of which $125.0 million
were issued in the Offering), and will mature on June 15, 2007. The Notes bear
interest at the rate per annum shown on the cover page hereof from June 24,
1997, or from the most recent date to which interest has been paid or provided
for, payable semi-annually to Holders of record at the close of business on the
June 1 or December 1 immediately preceding the interest payment date on June 15
and December 15 of each year, commencing December 15, 1997. The Company will pay
interest on overdue principal at 1% per annum in excess of such rate, and it
will pay interest on overdue installments of interest at such higher rate to the
extent lawful.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes are not
redeemable at the option of the Company prior to June 15, 2002. Thereafter, the
Notes are redeemable, at the Company's option, in whole or in part, at any time
or from time to time, upon not less than 30 nor more than 60 days' prior notice
mailed by first-class mail to each Holder's registered address, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
June 15 of the years set forth below:
REDEMPTION
PERIOD PRICE
------ ----------
2002............................. 105.063%
2003............................. 103.375
2004............................. 101.688
2005 and thereafter.............. 100.000
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In addition, at any time and from time to time prior to June 15, 2000, the
Company may redeem in the aggregate up to 35% of the original principal amount
of the Notes with the proceeds of one or more Public Equity Offerings following
which there is a Public Market, at a redemption price (expressed as a percentage
of principal amount) of 110.125% plus accrued and unpaid interest, if any, to
the redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 65% of the original aggregate principal amount
of the Notes must remain outstanding after each such redemption.
SELECTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
SUBSIDIARY GUARANTIES
Each of BMG, BMG Holdings, Inc., an Ontario corporation, Lobdell,
Winchester Fabrication Corporation, a Michigan corporation, Creative Fabrication
Corporation, a Tennessee corporation, Parallel Group International, Inc., an
Indiana corporation, Laserweld International, L.L.C., an Indiana limited
liability company, Concept Management Corporation, a Michigan corporation, and
Lewis Emery Capital Corporation, a Michigan corporation (each a "Subsidiary
Guarantor"), irrevocably and unconditionally Guarantee, as primary obligors and
not merely as sureties, on an unsecured senior subordinated basis the
performance and punctual payment when due, whether at Stated Maturity, by
acceleration or otherwise, of all obligations of the Company under the Indenture
and the Notes, whether for payment of principal of or interest on the Notes,
expenses, indemnification or otherwise (all such obligations guaranteed by the
Subsidiary Guarantors being herein called the "Guaranteed Obligations"). The
Subsidiary Guarantors agree to pay, in addition to the amount stated above, any
and all expenses (including reasonable counsel fees and expenses) incurred by
the Trustee or the Holders in enforcing any rights under the Subsidiary
Guaranties. Each Subsidiary Guaranty will be limited in amount to an amount not
to exceed the maximum amount that can be guaranteed by the applicable Subsidiary
Guarantor without rendering such Subsidiary Guaranty voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally. After the Issue Date, the Company
will cause each Restricted Subsidiary that becomes an obligor or guarantor with
respect to any of the obligations under one or more of the Bank Credit
Agreements to execute and deliver to the Trustee a supplemental indenture
pursuant to which such Restricted Subsidiary will Guarantee payment of the
Notes. See "Certain Covenants -- Future Subsidiary Guarantors" below.
Each Subsidiary Guaranty is a continuing guarantee and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon each Subsidiary Guarantor and (c) inure to the benefit of
and be enforceable by the Trustee, the Holders and their successors, transferees
and assigns. A Subsidiary Guaranty will be released upon the sale of all the
capital stock, or all or substantially all of the assets, of the applicable
Subsidiary Guarantor if such sale is made in compliance with the Indenture.
SUBORDINATION
The indebtedness evidenced by the Notes and the Subsidiary Guaranties
represents senior subordinated obligations of the Company and the Subsidiary
Guarantors, as the case may be. The payment of the principal of, premium (if
any) and interest on the Notes, the payment of any Subsidiary Guaranty and all
other Obligations under or in connection with the Notes, the Subsidiary
Guaranties, the Indenture and/or any related agreements, documents or
instruments are subordinate in right of payment, as set forth in the Indenture,
to the prior payment in full of all Senior Indebtedness of the Company or the
relevant Subsidiary Guarantor, as the case may be, whether outstanding on the
Issue Date or thereafter incurred, including all Obligations of the Company and
such Subsidiary Guarantor under the Senior Credit Facility. The Notes and
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the Subsidiary Guaranties are also effectively subordinated to any Secured
Indebtedness of the Company and the Subsidiary Guarantors to the extent of the
value of the assets securing such Indebtedness and to any liabilities of
Subsidiaries other than the Subsidiary Guarantors.
As of March 31, 1997, after giving pro forma effect to the Offering and the
Senior Credit Facility, (i) the Company would have had no outstanding Senior
Indebtedness (excluding unused commitments under the Senior Credit Facility) and
(ii) Senior Indebtedness of the Subsidiary Guarantors would have been
approximately $16.7 million. Although the Indenture contains limitations on the
amount of additional Indebtedness that the Company and its Restricted
Subsidiaries may incur, under certain circumstances the amount of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Senior Indebtedness. See "Certain Covenants -- Limitation on Indebtedness."
Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior
Indebtedness will rank senior to the Notes and the relevant Subsidiary Guaranty
in accordance with the provisions of the Indenture. The Notes and each
Subsidiary Guaranty will in all respects rank pari passu with all other senior
subordinated Indebtedness of the Company and the relevant Subsidiary Guarantor,
respectively. The Company and each Subsidiary Guarantor has agreed in the
Indenture that it will not Incur, directly or indirectly, any Indebtedness that
is subordinate or junior in ranking in right of payment to its Senior
Indebtedness unless such Indebtedness is pari passu with or is expressly
subordinated in right of payment to the Notes. Unsecured Indebtedness is not
deemed to be subordinated or junior merely because it is unsecured.
The Company may not pay, directly or indirectly, principal of, premium (if
any) or interest on, the Notes or any other Obligations under or in connection
with the Notes, the Indenture and/or any related agreements, documents or
instruments or make any deposit pursuant to the provisions described under "--
Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Subordinated Debt") if (i) any Senior Indebtedness is
not paid when due or (ii) any other default on any such Senior Indebtedness
occurs and the maturity of such Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, the default has been cured or waived and
any such acceleration has been rescinded or such Senior Indebtedness has been
paid in full in cash. However, the Company may pay the Subordinated Debt without
regard to the foregoing if the Company and the Trustee receive written notice
approving such payment from the Representative of the Senior Indebtedness with
respect to which either of the events set forth in clause (i) or (ii) of the
immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clauses (i) and
(ii) of the second preceding sentence) with respect to any Senior Indebtedness
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company may
not pay the Subordinated Debt for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 180 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice has been waived in
writing or (iii) because such Designated Senior Indebtedness has been repaid in
full in cash). Notwithstanding the provisions described in the immediately
preceding sentence, unless the holders of such Designated Senior Indebtedness or
the Representative of such holders has accelerated the maturity of such
Designated Senior Indebtedness, the Company may resume payments on the Notes
after the end of such Payment Blockage Period. The Notes shall not be subject to
more than one Payment Blockage Period in any consecutive 360-day period,
irrespective of the number of such nonpayment defaults with respect to
Designated Senior Indebtedness during such period.
Upon any payment or distribution of the assets of the Company of any kind
or character, whether in cash, property or securities, to creditors upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding, the holders of Senior
Indebtedness will be entitled to receive payment in full in cash of such Senior
Indebtedness before the Noteholders are entitled to receive any payment, and,
until the Senior Indebtedness is paid in full in cash, any payment or
distribution to which Noteholders would be
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entitled but for the subordination provisions of the Indenture will be made to
holders of such Senior Indebtedness as their interests may appear. If a payment
or distribution is made to Noteholders that, due to the subordination
provisions, should not have been made to them, such Noteholders are required to
hold it in trust for the holders of Senior Indebtedness and pay it over to them
as their interests may appear.
The obligations of a Subsidiary Guarantor under its Subsidiary Guaranty are
senior subordinated obligations. As such, the rights of Noteholders to receive
payment by a Subsidiary Guarantor pursuant to its Subsidiary Guaranty will be
subordinated in right of payment to the rights of holders of Senior Indebtedness
of such Subsidiary Guarantor. The terms of the subordination provisions
described above with respect to the Company's obligations under the Notes apply
equally to a Subsidiary Guarantor and the obligations of such Subsidiary
Guarantor under its Subsidiary Guaranty.
By reason of the subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company or a Subsidiary Guarantor who
are holders of Senior Indebtedness of the Company or a Subsidiary Guarantor, as
the case may be, may recover more, ratably, than the Noteholders, and creditors
of the Company who are not holders of Senior Indebtedness may recover less,
ratably, than holders of Senior Indebtedness and may recover more, ratably, than
the Noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to and in accordance with the provisions described under "--
Defeasance."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the
right to require that the Company repurchase all or a portion of such Holder's
Notes at a purchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of repurchase (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date), in accordance with the provisions of
the next paragraph.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Company
to purchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount outstanding at the repurchase date plus accrued and unpaid
interest, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest on the relevant interest
payment date); (2) the circumstances and relevant facts and relevant financial
information regarding such Change of Control; (3) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed); and (4) the instructions determined by the Company,
consistent with the covenant described hereunder, that a Holder must follow in
order to have its Notes repurchased.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to the covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The occurrence of certain of the events which would constitute a Change of
Control would constitute a default under the Senior Credit Facility. Future
Senior Indebtedness of the Company may contain prohibitions of certain events
which would constitute a Change of Control or require such Senior Indebtedness
to be repurchased upon a Change of Control. Moreover, the exercise by the
Holders of their right to require the Company to repurchase the Notes could
cause a default under such Senior Indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on the Company.
Finally, the Company's ability to pay cash to the Holders upon a repurchase may
be limited by the Company's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to
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make any repurchases required in connection with a Change of Control. The
Company's failure to purchase the Notes in connection with a Change in Control
would result in a default under the Indenture which would, in turn, constitute a
default under the Senior Credit Facility. In such circumstances, the
subordination provisions in the Indenture would likely restrict payment to the
Holders of the Notes.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Old Notes have been issued and the New Notes
will initially be issued in the form of a Global Note. The Global Note will be
deposited with, or on behalf of, the Depository and registered in the name of
the Depository or its nominee. Except as set forth below, the Global Note may be
transferred, in whole and not in part, only to the Depository or another nominee
of the Depository. Investors may hold their beneficial interests in the Global
Note directly through the Depository if they have an account with the Depository
or indirectly through organizations which have accounts with the Depository.
New Notes issued in exchange for Old Notes that were (i) originally issued
to institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act) who are not qualified institutional buyers
("QIBs") or (ii) issued as described below under "-- Certificated Notes" will be
issued in definitive form. Upon the transfer of a Note in definitive form, such
Note will, unless the Global Note has previously been exchanged for Notes in
definitive form, be exchanged for an interest in the Global Note representing
the principal amount of Notes being, transferred.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934 (the "Exchange Act"). The Depository was created to hold securities
of institutions that have accounts with the Depository ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depository's participants include securities
brokers and dealers (which may include the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Upon the issuance of a Global Note, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Note to the accounts of participants. The accounts to
be credited shall be designated by the Initial Purchasers of such Notes.
Ownership of beneficial interests in the Global Note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained by
the Depository (with respect to participants' interest) and such participants
(with respect to the owners of beneficial interests in the Global Note other
than participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to transfer or pledge
beneficial interests in a Global Note.
So long as the Depository, or its nominee, is the registered holder and
owner of such Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in a Global Note will not be entitled to have the Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of certificated Notes in definitive
form and will not be considered to be the owners or holders of any Notes under
such Global Note. The Company understands that under existing industry practice,
in the event an owner of a beneficial interest in a Global Note desires to take
any action that the Depository, as the holder of a Global Note, is entitled to
take, the Depository would authorize the participants to take such action, and
that the participants would authorize
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beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Payment of principal of and interest on Notes represented by a Global Note
registered in the name of and held by the Depository or its nominee will be made
to the Depository or its nominee, as the case may be, as the registered owner
and holder of such Global Note.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
the Depository or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in a Global Note held through
such participants will be governed by standing instructions and customary
practices and will be the responsibility of such participants. The Company will
not have any responsibility or liability for any aspect of the records relating
to, or payments made on account of, beneficial ownership interests in a Global
Note for any Note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests or for any other aspect of the
relationship between the Depository and its participants or the relationship
between such participants and the owners of beneficial interests in such Global
Note owned through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, a Global Note may not be transferred except as a whole by
the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
The Notes represented by a Global Note are exchangeable for certificated
Notes in definitive form of like tenor as such Notes in denominations of
U.S.$1,000 and integral multiples thereof if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for such Global
Note or if at any time the Depository ceases to be a clearing agency registered
under the Exchange Act, (ii) the Company in its discretion at any time
determines not to have all of the Notes represented by a Global Note or (iii) a
default entitling the holders of the Notes to accelerate the maturity thereof
has occurred and is continuing. Any Note that is exchangeable pursuant to the
preceding sentence is exchangeable for certificated Notes issuable in authorized
denominations and registered in such names as the Depository shall direct.
Subject to the foregoing, a Global Note is not exchangeable, except for a Global
Note of the same aggregate denomination to be registered in the name of the
Depository or its nominee.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company shall not, and shall not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness
unless, immediately after giving effect to such Incurrence, the Consolidated
Coverage Ratio exceeds 2.00 to 1 if such Indebtedness is Incurred prior to June
15, 1999 or 2.25 to 1 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness: (1)
Indebtedness and other Obligations Incurred pursuant to the Bank Credit
Agreements; provided, however, that, after giving effect to any such Incurrence,
the aggregate principal amount of such Indebtedness and other Obligations then
outstanding does not exceed the greater of (i) $110 million and (ii) the sum of
(x) 60% of the net book value of the inventory of the Company and its Restricted
Subsidiaries, and (y) 90% of the net book value of the accounts receivable of
the Company and its
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Restricted Subsidiaries, in each case determined in accordance with GAAP, and
(z) $70 million; (2) Indebtedness represented by the Notes issued in the
Offering (and the New Notes); (3) Indebtedness outstanding on the Issue Date
(other than Indebtedness described in clause (1) of this paragraph), including,
without limitation, the Existing Preferred Stock; (4) Indebtedness of the
Company owed to and held by any Wholly Owned Subsidiary or Indebtedness of a
Restricted Subsidiary owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that any subsequent issuance or transfer of any
Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness (other
than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case,
to constitute the Incurrence of such Indebtedness by the issuer thereof; (5)
Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to
paragraph (a) or pursuant to clause (1), (2), (3) or this clause (5); (6)
Indebtedness in respect of performance bonds, bankers' acceptances, letters of
credit and surety or appeal bonds entered into by the Company and the Restricted
Subsidiaries in the ordinary course of their business; (7) Hedging Obligations
consisting of Interest Rate Agreements and Currency Agreements entered into in
the ordinary course of business and not for the purpose of speculation;
provided, however, that, in the case of Currency Agreements and Interest Rate
Agreements, such Currency Agreements and Interest Rate Agreements do not
increase the Indebtedness of the Company outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest rates or
by reason of fees, indemnities and compensation payable thereunder; (8) Purchase
Money Indebtedness and Capital Lease Obligations Incurred to finance the
acquisition or improvement by the Company or a Restricted Subsidiary of any
assets in the ordinary course of business and which do not exceed $15 million in
the aggregate at any time outstanding; (9) Indebtedness and other Obligations
represented by the Subsidiary Guaranties and Guarantees of Indebtedness Incurred
pursuant to the Bank Credit Agreements; (10) Indebtedness arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight overdrafts) drawn
against insufficient funds in the ordinary course of business, provided that
such Indebtedness is extinguished within five business days of Incurrence; (11)
Indebtedness of the Company and its Restricted Subsidiaries arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, in any case Incurred in connection with the disposition of
any assets of the Company or any Restricted Subsidiary (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of such assets
for the purpose of financing such acquisition), in a principal amount not to
exceed the gross proceeds actually received by the Company or any Restricted
Subsidiary in connection with such disposition; (12) Tooling Indebtedness; and
(13) Indebtedness in an aggregate principal amount which, together with all
other Indebtedness of the Company and its Restricted Subsidiaries outstanding on
the date of such Incurrence (other than Indebtedness permitted by clauses (1)
through (12) above or paragraph (a)), does not exceed $20 million.
(c) Notwithstanding the foregoing, the Company shall not, and shall not
permit any Restricted Subsidiary to, Incur any Indebtedness pursuant to the
foregoing paragraph (b) if the proceeds thereof are used, directly or
indirectly, to Refinance (i) any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Notes and the Subsidiary Guaranties,
as applicable, to at least the same extent as such Subordinated Obligations or
(ii) any Senior Subordinated Indebtedness unless such Indebtedness shall be
Senior Subordinated Indebtedness or shall be subordinated to the Notes and the
Subsidiary Guaranties, as applicable.
(d) For purposes of determining compliance with the foregoing covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described above, the Company, in its sole discretion,
will classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of the above clauses and (ii) an
item of Indebtedness may be divided and classified in more than one of the types
of Indebtedness described above.
(e) Notwithstanding paragraphs (a) and (b) above, the Company shall not,
and shall not permit any Subsidiary Guarantor to, Incur (i) any Indebtedness if
such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable,
unless such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness or (ii) any
Secured Indebtedness that is not Senior Indebtedness of the
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Company or such Subsidiary Guarantor, as applicable, unless contemporaneously
therewith effective provision is made to secure the Notes or the Subsidiary
Guaranty, as applicable, equally and ratably with such Secured Indebtedness for
so long as such Secured Indebtedness is secured by a Lien.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) the Company is not able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted
Payment together with all other Restricted Payments (the amount of any payments
made in property other than cash to be valued at the fair market value of such
property, as determined in good faith by the Board of Directors) declared or
made since the Issue Date would exceed the sum of: (A) 50% of the Consolidated
Net Income accrued during the period (treated as one accounting period) from the
beginning of the fiscal quarter immediately following the fiscal quarter during
which the Notes are originally issued to the end of the most recent fiscal
quarter prior to the date of such Restricted Payment for which financial
statements are available (or, in case such Consolidated Net Income accrued
during such period (treated as one accounting period) shall be a deficit, minus
100% of such deficit); (B) the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Capital Stock (other than Disqualified
Stock) subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company); (C) the amount by which Indebtedness of the Company
or its Restricted Subsidiaries is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date, of any Indebtedness of the Company or its
Restricted Subsidiaries convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount of any cash, or the
fair value of any other property, distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange); (D) an amount equal to the sum of
(i) the net reduction in Investments in Unrestricted Subsidiaries resulting from
dividends, repayments of loans or advances or other transfers of assets
subsequent to the Issue Date, in each case to the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries, and (ii) the portion (proportionate
to the Company's equity interest in such Subsidiary) of the fair market value of
the net assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made (and treated as a Restricted Payment) by
the Company or any Restricted Subsidiary in such Unrestricted Subsidiary; and
(E) $5 million.
(b) The provisions of the foregoing paragraph (a) shall not prohibit: (i)
any purchase or redemption of Capital Stock or Subordinated Obligations of the
Company or any Restricted Subsidiary made in exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the Company
(other than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of the Company); provided, however, that (A) such purchase or
redemption shall be excluded from the calculation of the amount of Restricted
Payments and (B) the Net Cash Proceeds from such sale shall be excluded from the
calculation of amounts under clause (3)(B) of paragraph (a) above; (ii) any
purchase or redemption of (A) Subordinated Obligations of the Company made in
exchange for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to
paragraphs (b) and (c) of the covenant described under "-- Limitation on
Indebtedness" or (B) Subordinated Obligations of a Restricted Subsidiary made in
exchange for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of such Restricted Subsidiary or the Company which is permitted to
be Incurred pursuant to paragraphs (b) and (c) of the covenant described under
"-- Limitation on Indebtedness"; provided, however, that such purchase or
redemption shall be excluded from the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of (A) Disqualified Stock of the
Company made in exchange for, or out of the proceeds of the substantially
concurrent sale of, Disqualified Stock of the Company or (B) Disqualified Stock
of a Restricted Subsidiary made in exchange for, or out of the proceeds of the
substantially concurrent sale of, Disqualified Stock of such Restricted
Subsidiary or the Company; provided, however, that (1) at the time of such
exchange, no Default or Event of Default shall have occurred and be continuing
or would result therefrom and (2) such purchase or redemption will be excluded
from the calculation of the amount of Restricted Payments; (iv) dividends paid
within 60 days after the date of declaration thereof if at such date of
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declaration such dividend would have complied with this covenant; provided,
however, that at the time of payment of such dividend, no other Default shall
have occurred and be continuing (or would result therefrom); provided, further,
however, that such dividend shall be included in the calculation of the amount
of Restricted Payments; (v) the repurchase of shares of, or options to purchase
shares of, Capital Stock of the Company or any of its Subsidiaries from
officers, former officers employees, former employees, directors or former
directors of the Company or any of its Subsidiaries (or permitted transferees of
such employees, former employees, directors or former directors), pursuant to
the terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell, or are granted the option to purchase or sell,
shares of such common stock; provided, however, that the aggregate amount of
such repurchases shall not exceed $2.5 million in any one year and $5.0 million
in the aggregate; provided, further, however, that (1) at the time of such
repurchase, no Default or Event of Default shall have occurred and be continuing
or would result therefrom and (2) all such repurchases shall be included in the
calculation of the amount of Restricted Payments; or (vi) dividends and
redemptions required to be made with respect to the Existing Preferred Stock;
provided, however, that (1) at the time of any such dividend or redemption, no
Default or Event of Default shall have occurred and be continuing or would
result therefrom and (2) all such dividends and redemptions shall be included in
the calculation of the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or consensual restriction on the ability of any
Restricted Subsidiary (a) to pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) to make any loans or advances to the
Company or (c) transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in effect at or
entered into on the Issue Date; (ii) any encumbrance or restriction with respect
to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary which was entered into on or prior to the
date on which such Restricted Subsidiary was acquired by the Company (other than
as consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on such date; (iii)
any encumbrance or restriction pursuant to an agreement effecting a Refinancing
of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or
(ii) of this covenant (or effecting a Refinancing of such Refinancing
Indebtedness pursuant to this clause (iii)) or contained in any amendment to an
agreement referred to in clause (i) or (ii) of this covenant or this clause
(iii); provided, however, that the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in any such refinancing agreement or
amendment are no more restrictive in any material respect than the encumbrances
and restrictions with respect to such Restricted Subsidiary contained in such
agreements; (iv) any such encumbrance or restriction consisting of customary
non-assignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease or the property leased
thereunder; (v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness (other than Tooling
Indebtedness) of a Restricted Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements or
mortgages; (vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and (vii) any restriction
imposed by applicable law.
Limitation on Sales of Assets and Subsidiary Stock. The Company shall not,
and shall not permit any Restricted Subsidiary to, consummate any Asset
Disposition unless the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the shares and assets
subject to such Asset Disposition and at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
cash equivalents. For the purposes of this covenant, the following are deemed to
be cash and cash equivalents: (x) the assumption of Indebtedness of the Company
or any Restricted Subsidiary and the release of the Company or such Restricted
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Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company or any Restricted
Subsidiary from the transferee that are immediately converted by the Company or
such Restricted Subsidiary into cash.
With respect to any Asset Disposition occurring on or after the Issue Date
from which the Company or any Restricted Subsidiary receives Net Available Cash,
the Company or such Restricted Subsidiary shall (i) within 360 days after the
date such Net Available Cash is received and to the extent the Company or such
Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness) to (A) apply an amount equal to such Net Available Cash to prepay,
repay or purchase Senior Indebtedness of the Company or such Restricted
Subsidiary, in each case owing to a Person other than the Company or any
Affiliate of the Company, or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A), in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net Available
Cash received by the Company or another Restricted Subsidiary) and (ii) apply
such excess Net Available Cash (to the extent not applied pursuant to clause
(i)) as provided in the following paragraphs of the covenant described
hereunder; provided, however, that in connection with any prepayment, repayment
or purchase of Senior Indebtedness pursuant to clause (A) above, the Company or
such Restricted Subsidiary shall retire such Senior Indebtedness and shall cause
the related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased. The amount of Net
Available Cash required to be applied pursuant to clause (ii) above and not
theretofore so applied shall constitute "Excess Proceeds." Pending application
of Net Available Cash pursuant to this provision, such Net Available Cash shall
be invested in Temporary Cash Investments.
If at any time the aggregate amount of Excess Proceeds not theretofore
subject to an Excess Proceeds Offer (as defined below) totals at least $5
million, the Company shall, not later than 30 days after the end of the period
during which the Company is required to apply such Excess Proceeds pursuant to
clause (i) of the immediately preceding paragraph (or, if the Company so elects,
at any time within such period), make an offer (an "Excess Proceeds Offer") to
purchase from the Holders on a pro rata basis an aggregate principal amount of
Notes equal to the Excess Proceeds (rounded down to the nearest multiple of
$1,000) on such date, at a purchase price equal to 100% of the principal amount
of such Notes, plus, in each case, accrued interest (if any) to the date of
purchase (the "Excess Proceeds Payment"). Upon completion of an Excess Proceeds
Offer the amount of Excess Proceeds remaining after application pursuant to such
Excess Proceeds Offer, (including payment of the purchase price for Notes duly
tendered) may be used by the Company for any corporate purpose (to the extent
not otherwise prohibited by the Indenture).
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations thereunder in the event that such Excess Proceeds are received by
the Company under the covenant described hereunder and the Company is required
to repurchase Notes as described above. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the covenant
described hereunder, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under the covenant described hereunder by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction or series of related transactions (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless the terms thereof (1) are no less favorable to the Company
or such Restricted Subsidiary than those that could be obtained at the time of
such transaction in arm's-length dealings with a Person who is not such an
Affiliate, (2) if such Affiliate Transaction (or series of related Affiliate
Transactions) involve aggregate payments in an amount in excess of $1 million in
any one year, (i) are set forth in writing, (ii) comply with clause (1) and
(iii) have been approved by a majority of the disinterested members of the Board
of Directors and (3) if such Affiliate Transaction (or series of related
Affiliate Transactions) involve aggregate payments in an amount in excess of $5
million in any one year, (i) comply with clause (2) and (ii) have been
determined by a nationally recognized investment banking firm to be fair, from a
financial standpoint, to the Company and its Restricted Subsidiaries.
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(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under "-- Limitation on Restricted Payments," (ii) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise, pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans in the ordinary course of business and approved by the Board of
Directors, (iii) the grant of stock options or similar rights to employees and
directors of the Company in the ordinary course of business and pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business of the Company or its Restricted Subsidiaries,
(v) fees, compensation or employee benefit arrangements paid to and indemnity
provided for the benefit of directors, officers or employees of the Company or
any Subsidiary in the ordinary course of business, (vi) payments made to The
Oxford Investment Group, Inc. for (x) management and consulting services in an
aggregate amount not to exceed $1,000,000 in any one year and (y) investment
banking services in connection with acquisition of assets or businesses, by the
Company or any Subsidiary not to exceed the greater of (A) 1.25% of the purchase
price paid by the Company or such Subsidiary for the assets or business acquired
(including Indebtedness assumed by the Company or such Subsidiary as part of
such acquisition) and (B) $200,000; or (vii) any Affiliate Transaction between
the Company and a Restricted Subsidiary or between Restricted Subsidiaries in
the ordinary course of business (so long as the other stockholders of any
participating Restricted Subsidiaries which are not Wholly Owned Restricted
Subsidiaries are not themselves Affiliates of the Company).
Limitation on the Issuance or Sale of Capital Stock of Restricted
Subsidiaries. The Company shall not (i) sell, pledge, hypothecate or otherwise
dispose of any shares of Capital Stock of a Restricted Subsidiary (other than
pledges of Capital Stock securing Senior Indebtedness) or (ii) permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock other than (A) to the Company or a
Wholly Owned Subsidiary, (B) directors' qualifying shares, (C) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary or (D) the issuance of Preferred
Stock by any Subsidiary Guarantor as partial payment for the acquisition by such
Subsidiary Guarantor of Additional Assets. Notwithstanding the foregoing, the
Company may sell, and may permit a Restricted Subsidiary to issue and sell, up
to 20% of the outstanding Common Stock of a Restricted Subsidiary to officers
and employees of such Restricted Subsidiary. The proceeds of any sale of such
Capital Stock permitted hereby will be treated as Net Available Cash from an
Asset Disposition and must be applied in accordance with the terms of the
covenant described under "-- Limitation on Sales of Assets and Subsidiary
Stock."
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any
Lien of any nature whatsoever on any property of the Company or any Restricted
Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned
at the Issue Date or thereafter acquired, which secures Indebtedness that ranks
pari passu with or is subordinated to the Notes or the Subsidiary Guaranties
unless (i) if such Lien secures Indebtedness that ranks pari passu with the
Notes and the Subsidiary Guaranties, the Notes are secured on an equal and
ratable basis with the obligation so secured until such time as such obligation
is no longer secured by a Lien or (ii) if such Lien secures Indebtedness that is
subordinated to the Notes and the Subsidiary Guaranties, such Lien shall be
subordinated to a Lien granted to the Holders on the same collateral as that
securing such Lien to the same extent as such subordinated Indebtedness is
subordinated to the Note and the Subsidiary Guaranties.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
related transactions, all or substantially all its assets to, any Person,
unless: (i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and the
Successor Company (if not the Company) shall expressly assume, by an indenture
supplemental thereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction on a
pro forma basis (and treating any Indebtedness which becomes an obligation of
the Successor Company or any Subsidiary as a result of such transaction as
having been Incurred by such Successor Company or such Subsidiary at the time of
such transaction), no Default shall have occurred and be
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continuing; (iii) except in the case of a merger the sole purpose of which is to
change the Company's jurisdiction of incorporation, immediately after giving
effect to such transaction on a pro forma basis, the Successor Company would be
able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of
the covenant described under "-- Limitation on Indebtedness"; (iv) immediately
after giving effect to such transaction on a pro forma basis, the Successor
Company shall have Consolidated Net Worth in an amount that is not less than the
Consolidated Net Worth of the Company immediately prior to such transaction; and
(v) the Company shall have delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation, merger or transfer
and such supplemental indenture (if any) comply with the Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
The Company shall not permit any Subsidiary Guarantor to consolidate with
or merge with or into, or convey, transfer or lease, in one transaction or a
series of transactions, all or substantially all its assets to, any Person,
unless: (i) the resulting, surviving or transferee Person (if not such
Subsidiary) shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and the
Successor Company (if not such Subsidiary) shall expressly assume, by a Guaranty
Agreement, in form satisfactory to the Trustee, all the obligations of such
Subsidiary under its Subsidiary Guaranty; (ii) immediately after giving effect
to such transaction on a pro forma basis (and treating any Indebtedness which
becomes an obligation of the resulting, surviving or transferee Person as a
result of such transaction as having been Incurred by such Person at the time of
such transaction), no Default shall have occurred and be continuing; and (iii)
the Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and
such Guaranty Agreement comply with the Indenture. The provisions of clauses (i)
and (iii) above shall not apply to any transactions which constitute an Asset
Disposition if the Company has complied with the applicable provisions of the
covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock"
above.
Future Guarantors. The Company shall cause each Restricted Subsidiary that
at any time becomes an obligor or guarantor with respect to any obligations
under one or more Bank Credit Agreements to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Restricted Subsidiary will
Guarantee payment of the Notes on the same terms and conditions as those set
forth in the Indenture. Each Subsidiary Guaranty will be limited in amount to an
amount not to exceed the maximum amount that can be Guaranteed by the applicable
Subsidiary Guarantor without rendering such Subsidiary Guaranty voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
SEC Reports. Until such time as the Company shall become subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall provide the Trustee, the Initial Purchasers, the Noteholders and
prospective Noteholders (upon request) with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so provided at the
times specified for the filing of such information, documents and reports under
such Sections. Thereafter, notwithstanding that the Company may not be required
to remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the SEC and provide the Trustee and
Noteholders and prospective Noteholders (upon request) with such annual reports
and such information, documents and other reports as are specified in such
Sections and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed and provided at the
times specified for the filing of such information, documents and reports under
such Sections; provided, however, that the Company shall not be required to file
any report, document or other information with the SEC if the SEC does not
permit such filing.
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DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due (whether or not such payment is
prohibited by the provisions described under "Subordination" above), continued
for 30 days, (ii) a default in the payment of principal of any Note when due at
its Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise (whether or not such payment is prohibited by the
provisions described under "Subordination" above), (iii) the failure by the
Company, to comply for 30 days after notice with any of its obligations under
the covenants described under "-- Limitation on Indebtedness," "-- Limitation on
Restricted Payments," "Limitation on Sales of Assets and Subsidiary Stock," and
"Merger, Consolidation and Sale of Assets", (iv) the failure by the Company to
comply for 60 days after notice with its other agreements contained in the
Indenture, (v) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $5 million (the "cross-acceleration
provision"), (vi) certain events of bankruptcy, insolvency or reorganization of
the Company or a Significant Subsidiary (the "bankruptcy provisions"), (vii) any
judgment or decree for the payment of money in excess of $5 million is rendered
against the Company or a Restricted Subsidiary, remains outstanding following
such judgment and is not discharged, waived or stayed within 60 days after entry
of such judgment or decree (the "judgment default provision"), or (viii) a
Subsidiary Guaranty ceases to be in full force and effect (other than in
accordance with the terms of such Subsidiary Guaranty) or a Subsidiary Guarantor
denies or disaffirms its obligations under its Subsidiary Guaranty. However, a
default under clause (iii) or (iv) will not constitute an Event of Default until
the Trustee or the Holders of 25% in principal amount of the outstanding Notes
notify the Company of the default and the Company does not cure such default
within the time specified in clauses (iii) and (iv) hereof after receipt of such
notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders of the Notes. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt thereof and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Notes have not given the Trustee
a direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount of the
outstanding Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of or interest on any Note, the Trustee may withhold notice if and
so long
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as a committee of its trust officers determines that withholding notice is not
opposed to the interest of the Holders. In addition, the Company is required to
deliver to the Trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. The Company also is required to deliver to
the Trustee, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Defaults, their status and what action the
Company is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the Holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
Holder of an outstanding Note affected thereby, no amendment may, among other
things, (i) reduce the amount of Notes whose Holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or extend the Stated Maturity of any
Note, (iv) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "-- Optional
Redemption" above, (v) make any Note payable in money other than that stated in
the Note, (vi) impair the right of any Holder to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes or any
Subsidiary Guaranty, (vii) make any change in the amendment provisions which
require each Holder's consent or in the waiver provisions or (viii) make any
change to the subordination provisions of the Indenture that would adversely
affect the Noteholders.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add guarantees with respect to the Notes, to release Subsidiary
Guarantors when permitted by the Indenture, to secure the Notes, to add to the
covenants of the Company for the benefit of the Holders or to surrender any
right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any Holder or to comply with any requirement of
the SEC in connection with the qualification of the Indenture under the Trust
Indenture Act. However, no amendment may be made to the subordination provisions
of the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
their Representative) consents to such change.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Holders a notice briefly describing such amendment. However,
the failure to give such notice to all Holders, or any defect therein, will not
impair or affect the validity of the amendment.
TRANSFER
Certificated Notes will be issued in registered form and will be
transferable only upon the surrender of the Notes being transferred for
registration of transfer. The Company may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge payable in connection
with certain transfers and exchanges.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to
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register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain a registrar and paying agent in respect of
the Notes. The Company at any time may terminate its obligations under "--
Change of Control" and under the covenants described under "-- Certain
Covenants" (other than the covenant described under "-- Merger and
Consolidation"), the operation of the cross-acceleration provision, the
bankruptcy provisions with respect to Significant Subsidiaries and the
judgment default provision described under "-- Defaults" above and the
limitations contained in clauses (iii) and (iv) under "Certain Covenants --
Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iii) (but only with respect to clauses
(iii) or (iv) under "Certain Covenants -- Merger and Consolidation as it relates
to the failure to comply with such covenants), (iv), (v), (vi) or (vii) under
"-- Defaults" above or because of the failure of the Company to comply with
clause (iii) or (iv) under "Certain Covenants -- Merger and Consolidation"
above. If the Company exercises its legal defeasance option or its covenant
defeasance option, each Subsidiary Guarantor will be released from all of its
obligations with respect to its Subsidiary Guaranty.
In order to exercise either defeasance option, (a) such defeasance must not
result in a breach of, or otherwise constitute a default under any agreement or
investment with respect to any Senior Indebtedness, and no default may exist
under any Indebtedness and (b) the Company must irrevocably deposit in trust
(the "defeasance trust") with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Notes to redemption or
maturity, as the case may be, and must comply with certain other conditions,
including delivery to the Trustee of an Opinion of Counsel to the effect that
holders of the Notes will not recognize income, gain or loss for Federal income
tax purposes as a result of such deposit and defeasance and will be subject to
Federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred.
CONCERNING THE TRUSTEE
First Trust National Association is the Trustee under the Indenture and has
been appointed by the Company as Registrar and Paying Agent with regard to the
Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes are governed by, and construed
in accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; or (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or another Restricted Subsidiary; provided,
however, that any such Restricted Subsidiary is primarily engaged in a Related
Business.
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"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "Certain Covenants -- Limitation on
Restricted Payments," "Certain Covenants -- Limitation on Affiliate
Transactions" and "Certain Covenants -- Limitations on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares and, to the
extent required by local ownership laws in foreign countries, shares owned by
foreign shareholders), (ii) all or substantially all the assets of any division,
business segment or comparable line of business of the Company or any Restricted
Subsidiary or (iii) any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such Restricted
Subsidiary. Notwithstanding the foregoing, the term "Asset Disposition" shall
not include (x) a disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (y) for
purposes of the covenant described under "Certain Covenants -- Limitation on
Sales of Assets and Subsidiary Stock", a disposition that constitutes a
Permitted Investment or a Restricted Payment permitted by the covenant described
under "Certain Covenants -- Limitation on Restricted Payments", and (z) a
disposition of assets having a fair market value of less than $1 million.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreements" means the Senior Credit Facility and any other
bank credit agreement or similar facility entered into in the future by the
Company or any Restricted Subsidiary as any of the same may be amended, waived,
modified, Refinanced or replaced from time to time (except to the extent that
any such amendment, waiver, modification, replacement or Refinancing would be
prohibited by the terms of the Indenture).
"Bank Indebtedness" means any and all present and future amounts payable
under or in respect of the Bank Credit Agreements, including principal, premium
(if any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization, whether or not a claim for
post-filing interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, Guarantees and all other amounts and other
Obligations payable thereunder or in respect thereof at any time.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness
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represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that for purposes of this clause such person
or group shall be deemed to have "beneficial ownership" of all shares that
any such person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total voting power of the Voting Stock
of the Company; provided, however, that such event shall not be deemed to
be a Change of Control so long as the Permitted Holders beneficially own,
directly or indirectly, in the aggregate a greater percentage of the total
voting power of the Voting Stock of the Company than such other person or
group;
(ii) after the first public offering of common stock of the Company,
during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by
a majority vote of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office; or
(iii) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company to another
Person (other than a Person that is controlled by the Permitted Holders),
and, in the case of any such merger or consolidation, the securities of the
Company that are outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of the Voting Stock of
the Company are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days (or, if less, the
number of days after the end of such fiscal quarter as the consolidated
financial statements of the Company shall be available) prior to the date of
such determination (determined, for the first three fiscal quarters ending
subsequent to the Issue Date, by annualizing such quarters to the extent
completed) to (ii) Consolidated Interest Expense for such four fiscal quarters;
provided, however, that (1) if the Company or any Restricted Subsidiary has
Incurred any Indebtedness since the beginning of such period that remains
outstanding on such date of determination or if the transaction giving rise to
the need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period (except that, in the case
of Indebtedness used to finance working capital needs incurred under a revolving
credit or similar arrangement, the amount thereof shall be deemed to be the
average daily balance of such Indebtedness during such four-fiscal-quarter
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period), (2) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for such period
shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period, and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased, assumed by a third person
(to the extent the Company and its Restricted Subsidiaries are no longer liable
for such Indebtedness) or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such period the Company shall
have consummated a Public Equity Offering following which there is a Public
Market, Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its Restricted
Subsidiaries in connection with such Public Equity Offering for such period, (4)
if since the beginning of such period the Company or any Restricted Subsidiary
(by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an
acquisition of assets, which acquisition constitutes all or substantially all of
an operating unit of a business, including any such Investment or acquisition
occurring in connection with a transaction requiring a calculation to be made
hereunder, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period and (5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income, earnings or expense relating thereto and the amount of Consolidated
Interest Expense associated with any Indebtedness Incurred in connection
therewith, the pro forma calculations shall be prepared in accordance with
Article 11 of Regulation S-X promulgated by the Commission as determined in good
faith by a responsible financial or accounting Officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (i) interest expense
attributable to Capital Lease Obligations, (ii) amortization of debt discount,
(iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs associated with Hedging
Obligations (including amortization of fees), (vii) Preferred Stock dividends in
respect of all Preferred Stock held by Persons other than the Company or a
Wholly Owned Subsidiary, and (viii) interest actually paid on any Indebtedness
of any other Person that is Guaranteed by the Company or any Restricted
Subsidiary. Notwithstanding the foregoing, net interest expense attributable to
Tooling Indebtedness shall not be included in Consolidated Interest Expense
except to the extent such expense would be included in interest expense in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income (or loss) of
any Person if such Person is not a Restricted Subsidiary, except that subject to
the
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exclusion contained in clause (iv) below, the Company's equity in the net income
of any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other distribution
paid to a Restricted Subsidiary, to the limitations contained in clause (iii)
below); (ii) for purposes of subclause (a)(3)(A) of the covenant described under
"Certain Covenants -- Limitation on Restricted Payments" only, any net income
(or loss) of any Person acquired by the Company or a Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted Subsidiary
is subject to restrictions, directly or indirectly, on the payment of dividends
or the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that (A) subject to the exclusion contained
in clause (iv) below, the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been distributed by
such Restricted Subsidiary consistent with such restriction during such period
to the Company or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid to
another Restricted Subsidiary, to the limitation contained in this clause) and
(B) the Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income; (iv)
any gain (or loss) realized upon the sale or other disposition of any assets of
the Company or its consolidated Subsidiaries (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise disposed of in
the ordinary course of business and any gain (or loss) realized upon the sale or
other disposition of any Capital Stock of any Person; (v) extraordinary gains or
losses; and (vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
"Certain Covenants -- Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement to which
such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend up to,
at least $10 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable, at the option of the holder thereof, for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes.
"EBITDA" for any period means the sum of Consolidated Net Income plus
Consolidated Interest Expense plus, without duplication, the following to the
extent deducted in calculating such Consolidated Net
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Income: (i) income tax expense (including Michigan Single Business Tax expense),
(ii) depreciation expense, (iii) amortization expense and (iv) all other
non-cash items reducing Consolidated Net Income (other than items that will
require cash payments and for which an accrual or reserve is, or is required by
GAAP to be, made), less all non-cash items increasing Consolidated Net Income,
in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
of, a Subsidiary of the Company shall be added to Consolidated Net Income to
compute EBITDA only to the extent (and in the same proportion) that the net
income of such Subsidiary was included in calculating Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Preferred Stock" means the Series A $3.00 cumulative Preferred
Stock issued by Lobdell and the Series B Preferred Stock issued by Lobdell in
the aggregate amount of $50.7 million, less any shares of such preferred stock
repurchased, redeemed or canceled subsequent to the Issue Date, as the terms of
such preferred stock shall exist as of the Issue Date.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board and (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing
any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary; provided, further, however, that
in the case of a discount security, neither the accrual of interest nor the
accretion of original issue discount shall be considered an Incurrence of
Indebtedness, but the entire face amount of such security shall be deemed
Incurred upon the issuance of such security. The term "Incurrence" when used as
a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property or
services, all conditional sale obligations of such Person and all obligations of
such Person under any title retention agreement (but excluding trade accounts
payables arising in the ordinary course of business and which are not more than
90 days past due and not in dispute), which purchase price or obligation is due
more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services
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(provided that, in the case of obligations of an acquired Person assumed in
connection with an acquisition of such Person, such obligations would constitute
Indebtedness of such Person); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit); (v) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary of such Person, any Preferred Stock
(but excluding, in each case, any accrued dividends); (vi) all obligations of
the type referred to in clauses (i) through (v) of other Persons and all
dividends of other Persons for the payment of which, in either case, such Person
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee; (vii) all obligations of the
type referred to in clauses (i) through (vi) of other Persons secured by any
Lien on any property or asset of such Person (whether or not such obligation is
assumed by such Person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the obligation
so secured; and (viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations as
described above at such date; provided, however, that the amount outstanding at
any time of any Indebtedness issued with original issue discount shall be deemed
to be the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed to
protect the Company or any Restricted Subsidiary against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under "Certain Covenants -- Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
by the Company or any of its Subsidiaries therefrom (including any cash payments
received by way of deferred payment of principal
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pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other noncash form) in each case
net of (i) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon or other security agreement of any
kind with respect to such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or Joint Ventures as a result of such Asset Disposition and (iv)
the deduction of appropriate amounts provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property or
other assets disposed in such Asset Disposition and retained by the Company or
any Restricted Subsidiary after such Asset Disposition, including without
limitation liabilities under any indemnification obligations associated with
such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys fees,
accountants fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Obligations" means all present and future obligations for principal,
premium, interest (including, without limitation, any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law), penalties, fees, indemnifications,
reimbursements (including, without limitation, all reimbursement and other
obligation pursuant to any letters of credit, bankers acceptances or similar
instruments or documents), damages and other liabilities payable under the
documentation at any time governing any indebtedness.
"Permitted Holders" means (i) any of Selwyn Isakow, his spouse and any of
his lineal descendants and their respective spouses (collectively, the "Isakow
Family") whether acting in their own name or as one or as a majority of persons
having the power to exercise the voting rights attached to, or having investment
power over, shares held by others, (ii) any controlled Affiliate of any member
of the Isakow Family, and (iii) any trust solely for the benefit of one or more
members of the Isakow Family (whether or not any member of the Isakow Family is
a trustee of such trust).
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, (ii) a Restricted Subsidiary or a Person that
will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (iii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iv) Temporary Cash Investments; (v) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (vi) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vii) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(viii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (ix) Persons other than Restricted
Subsidiaries that are primarily engaged in a Related Business, in an aggregate
amount not to exceed $15 million (to the extent utilized for an Investment, such
amount will be reinstated to the extent that the Company or any Restricted
Subsidiary receives dividends, repayments of loans or other transfers of assets
as a return of such Investment); (x) any Person to the extent such
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Investment is received in exchange for the transfer to such Person of the assets
owned as of the Issue Date by Laserweld International L.L.C.; and (xi) any
Person to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to the
covenant described under "Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock."
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Public Market" means any time after (i) a Public Equity Offering has been
consummated and (ii) at least 10% of the total issued and outstanding common
stock of the Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Purchase Money Indebtedness" mean Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligations
under any title retention agreement, other purchase money obligations and
obligations in respect of industrial revenue bonds or similar Indebtedness, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; provided, however, that any Lien arising
in connection with any such Indebtedness shall be limited to the specified asset
being financed or, in the case of real property or fixtures, including additions
and improvements, the real property on which such asset is attached; and
provided, further, however, that such Indebtedness is Incurred within 90 days
after such acquisition of such asset by the Company or Restricted Subsidiary.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture; provided, however, that (i)
such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary
(as determined in good faith by the Board of Directors) to the businesses of the
Company and the Restricted Subsidiaries on the Issue Date.
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"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"Restricted Payment" means, with respect to any Person, (i) the declaration
or payment of any dividends or any other distributions on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the holders of its
Capital Stock, except dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and except dividends or distributions
payable solely to the Company or a Restricted Subsidiary (and, if such
Restricted Subsidiary is not wholly owned, to its other shareholders on a pro
rata basis or on a basis that results in the receipt by the Company or a
Restricted Subsidiary of dividends or distributions of greater value than it
would receive on a pro rata basis), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company held by
any Person or of any Capital Stock of a Restricted Subsidiary held by any
Affiliate of the Company (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) the making
of any Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary. As of the Issue Date, the following Subsidiaries of the
Company were Restricted Subsidiaries: Lobdell Emery Corporation, BMG North
America Limited, Winchester Fabrication Corporation, Creative Fabrication
Corporation, Parallel Group International, Inc., Laserweld International,
L.L.C., Concept Management Corporation, Lewis Emery Capital Corporation and BMG
Holdings, Inc.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative
meaning.
"Senior Credit Facility" means the credit agreement dated as of the Issue
Date, between the Company, the lenders and other persons party thereto and NBD
Bank, as Agent, together with the related documents thereto executed at any time
(including, without limitation, any guarantee agreements, security agreements
and other collateral documents) and the credit facilities thereunder, in each
case as such documents may be amended (including, without limitation, any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including, without limitation, increasing
the amount of available borrowings thereunder (provided that such increase in
borrowings is permitted by the covenant described under "Certain Covenants --
Limitation on Indebtedness") or adding subsidiaries as additional borrowers or
guarantors thereunder).
"Senior Indebtedness" of the Company means (i) all Bank Indebtedness of the
Company, whether outstanding on the Issue Date or thereafter Incurred, including
the Guarantees by the Company of all Bank Indebtedness, and (ii) accrued and
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post-filing interest is allowed in such proceeding) in respect
of (A) indebtedness of the Company for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which the Company is responsible or liable unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding, it
is provided that such obligations are subordinate in right of payment to the
Notes; provided, however, that Senior Indebtedness shall not include (1) any
obligation of the
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Company to any Subsidiary, (2) any liability for Federal, state, local or other
taxes owed or owing by the Company, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of the Company (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior in any respect (other than as a result
of the Indebtedness being unsecured) to any other Indebtedness or other
obligation of the Company, including any Senior Subordinated Indebtedness and
any Subordinated Obligations, (5) any obligations with respect to any Capital
Stock or (6) that portion of any Indebtedness which at the time of Incurrence is
Incurred in violation of the Indenture. "Senior Indebtedness" of any Subsidiary
Guarantor has a correlative meaning.
"Senior Subordinated Indebtedness" of the Company means the Notes and any
other Obligations under or in connection with the Notes, the Indenture and/or
any related agreements, documents or instruments, whether now owing or hereafter
incurred or owing and any other Indebtedness of the Company that specifically
provides that such Indebtedness is to rank pari passu with the Notes in right of
payment and is not subordinated by its terms in right of payment to any
Indebtedness or other obligation of the Company which is not Senior
Indebtedness. "Senior Subordinated Indebtedness" of any Subsidiary Guarantor has
a correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect. "Subordinated Obligation" of any Subsidiary Guarantor has a correlative
meaning.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Subsidiary Guaranty" means the Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Notes.
"Subsidiary Guarantor" means each Subsidiary designated as such on the
signature pages of the Indenture and any other Subsidiary that has issued a
Subsidiary Guaranty.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by an registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more
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than 90 days after the date of acquisition, issued by a corporation (other than
an Affiliate of the Company) organized and in existence under the laws of the
United States of America, any State thereof or the District of Columbia or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Ratings Group, and (v) investments in securities with maturities of
six months or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"Tooling Indebtedness" means all present and future Indebtedness of the
Company or any Restricted Subsidiary the proceeds of which are utilized to
finance dies, molds, tooling and similar items (collectively "Tooling") for
which the sales of such Tooling is covered under specific written purchase
orders or agreements between the Company or any Restricted Subsidiary and the
purchaser of such Tooling.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under "Certain Covenants -- Limitation on
Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
"Certain Covenants -- Limitation on Indebtedness" and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be notified by the Company to the Trustee by promptly filing with the Trustee a
copy of the board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
and/or one or more Wholly Owned Subsidiaries.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the certain United States federal
income tax consequences of the Exchange Offer to a holder of Old Notes that is
an individual citizen or resident of the United States or a United States
corporation that purchased the Old Notes pursuant to their original issue (a
"U.S. Holder"). It is based on the Internal Revenue Code of 1986, as amended to
the date hereof (the "Code"), existing and proposed Treasury regulations, and
judicial and administrative determinations, all of which are subject to change
at any time, possibly on a retroactive basis. The following relates only to the
Old Notes, and the New Notes received therefor, that are held as "capital
assets" within the meaning of Section 1221 of the Code by U.S. Holders. It does
not discuss state, local, or foreign tax consequences, nor does it discuss tax
consequences to categories of holders that are subject to special rules, such as
foreign persons, tax-exempt organizations, insurance companies, banks, and
dealers in stocks and securities. Tax consequences may vary depending on the
particular status of an investor. No rulings will be sought from the Internal
Revenue Service with respect to the federal income tax consequences of the
Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE OLD NOTES
FOR NEW NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING
THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS
PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE OLD NOTES FOR NEW
NOTES.
MARKET DISCOUNT
A U.S. Holder of a Note, other than an initial Holder, will be treated
as holding the Note at a market discount (a "Market Discount Note") if the
amount for which such U.S. Holder purchased the Note is less than the Note's
principal amount, subject to a de minimis rule.
In general, any partial payment of principal on, or gain recognized on
the maturity or disposition of, a Market Discount Note will be treated as
ordinary income to the extent that such gain does not exceed the accrued market
discount on such Note. Alternatively, a U.S. Holder of a Market Discount Note
may elect to include market discount in income currently over the life of the
Market Discount Note. Such an election applies to all debt instruments with
market discount acquired by the electing U.S. Holder on or after the first day
of the first taxable year to which the election applies and may not be revoked
without the consent of the Internal Revenue Service.
Market discount accrues on a straight-line basis, unless the U.S.
Holder elects to accrue such discount on a constant yield to a maturity basis.
Such an election is applicable only to the Note with respect to which is made
and is irrevocable. A U.S. Holder of a Market Discount Note that does not elect
to include market discount in income currently, generally will be required to
defer deductions for interest on borrowings allocable to such Note, in an
amount not exceeding the accrued market discount on such Note, until the
maturity or disposition of such Note.
THE EXCHANGE OFFER
The exchange of Old Notes pursuant to the Exchange Offer should be treated
as a continuation of the corresponding Old Notes because the terms of the New
Notes are not materially different from the terms of the Old Notes. Accordingly,
such exchange should not constitute a taxable event to U.S. Holders and,
therefore, (i) no gain or loss should be realized by a U.S. Holder upon receipt
of a New Note, (ii) the holding period of the New Note should include the
holding period of the Old Note exchanged therefor and (iii) the adjusted tax
basis of the New Note should be the same as the adjusted tax basis of the Old
Note exchanged therefor immediately before the exchange.
STATED INTEREST
Stated interest on a Note will be taxable to a U.S. Holder as ordinary
interest income at the time that such interest accrues or is received, in
accordance with the U.S. Holder's regular method of accounting for federal
income tax purposes. The Notes are not considered to have been issued with
original issue discount for federal income tax purposes.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
A U.S. Holder's tax basis in a Note generally will be its cost. A U.S.
Holder generally will recognize gain or loss on the sale, exchange or retirement
of a Note in an amount equal to the difference between the amount realized on
the sale, exchange or retirement and the tax basis of the Note. Gain or loss
recognized on the sale, exchange or retirement of a Note (excluding amounts
received in respect of accrued interest, which will be taxable as ordinary
interest income) generally will be capital gain or loss and will be long-term
capital gain or loss if the Note was held for more than one year.
BACKUP WITHHOLDING
Under certain circumstances, a U.S. Holder of a Note may be subject to
"backup withholding" at a 31% rate with respect to payments of interest thereon
or the gross proceeds from the disposition thereof. This withholding generally
applies if the U.S. Holder fails to furnish his or her social security number or
other taxpayer identification number in the specified manner and in certain
other circumstances. Any amount withheld from a payment to a U.S. Holder under
the backup withholding rules is allowable as a credit against such U.S. Holder's
federal income tax liability, provided that the required information is
furnished to the IRS.
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Corporations and certain other entities described in the Code and Treasury
regulations are exempt from backup withholding if their exempt status is
properly established.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. Each of the Company and the Subsidiary Guarantors has agreed
that, starting on the Expiration Date and ending on the close of business on the
first anniversary of the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 1997 (90 days
after the date of this Prospectus), all dealers effecting transactions in the
New Notes may be required to deliver a prospectus.
Neither the Company nor any of the Subsidiary Guarantors will receive any
proceeds from any sale of New Notes by broker-dealers. New Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such New Notes.
Any broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company and each of the Subsidiary Guarantors
have agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the Old Notes) other than commissions
or concessions of any brokers or dealers and will indemnify the holders of the
Old Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Dykema Gossett PLLC, Bloomfield Hills, Michigan. Rex E. Schlaybaugh,
Jr. is a shareholder, the Vice Chairman of the Board and a director of the
Company. Mr. Schlaybaugh is a member of Dykema Gossett PLLC. Certain matters
relating to the Subsidiary Guaranties and the application of Ontario law to them
will be passed upon for the Company by Fasken Campbell Godfrey, Toronto,
Ontario.
EXPERTS
The consolidated financial statements of the Company as of and for the year
ended March 31, 1997 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent auditors, given on
the authority of said firm as experts in auditing and accounting.
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The consolidated financial statements of the Company as of March 31, 1996
and for the period from October 28, 1995 through March 31, 1996 appearing in
this Prospectus and the related financial statement schedule included in the
Exchange Offer Registration Statement have been audited by Deloitte & Touche,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The consolidated financial statements of BMG North America Limited
(Predecessor) for the period from April 1, 1995 through October 27, 1995 and for
the year ended March 31, 1995 appearing in this Prospectus and the related
financial statement schedule included in the Exchange Offer Registration
Statement have been audited by Deloitte & Touche, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Lobdell Emery Corporation as
of December 31, 1996 and 1995 and for each year in the three-year period ended
December 31, 1996 included in this Prospectus have been so included in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
OXFORD AUTOMOTIVE, INC.
Report of Independent Accountants........................... F-2
Independent Auditors' Report................................ F-3
Consolidated Balance Sheets as of March 31, 1997 and 1996... F-4
Consolidated Statements of Operations for the year ended
March 31, 1997 and the period from October 28, 1995
through March 31, 1996 for the Company; and for the period
from April 1, 1995 through October 27, 1995 and for the
year ended March 31, 1995 for the Predecessor............. F-5
Consolidated Statement of Changes in Shareholders' Equity
for the year ended March 31, 1997 and the period from
October 28, 1995 through March 31, 1996 for the Company;
and for the period from April 1, 1995 through October 27,
1995 and the year ended March 31, 1995 for the
Predecessor............................................... F-6
Consolidated Statements of Cash Flows for the year ended
March 31, 1997 and the period from October 28, 1995
through March 31, 1996 for the Company; and for the period
from April 1, 1995 through October 27, 1995 and for the
year ended March 31, 1995 for the Predecessor............. F-7
Notes to Consolidated Financial Statements.................. F-8
LOBDELL EMERY CORPORATION
Report of Independent Accountants........................... F-24
Consolidated Balance Sheets as of December 31, 1996 and
1995...................................................... F-25
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994.......................... F-26
Consolidated Statement of Changes in Shareholders' Equity
for the years ended December 31, 1996, 1995 and 1994...... F-27
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.......................... F-28
Notes to Consolidated Financial Statements.................. F-29
F-1
90
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Oxford Automotive, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Oxford Automotive, Inc. and its subsidiaries (the Company) at March 31, 1997 and
the result of their operations and their cash flows for the year ended March 31,
1997 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
The financial statements of the Company as of March 31, 1996 and for the
period from October 28, 1995 through March 31, 1996 and the financial statements
of BMG North America Limited (the Predecessor) for the period from April 1, 1995
through October 27, 1995 and for the year ended March 31, 1995 were audited by
other independent accountants whose report dated May 21, 1996 expressed an
unqualified opinion on those statements.
PRICE WATERHOUSE LLP
Detroit, Michigan
May 19, 1997, except as to Notes 3 and 12
which are as of July 15, 1997
F-2
91
INDEPENDENT AUDITORS' REPORT
To the Directors of
Oxford Automotive, Inc. and BMG North America Limited
We have audited the consolidated balance sheet of Oxford Automotive, Inc.
as at March 31, 1996 and the consolidated statements of operations, changes in
shareholders' equity and cash flows for the period from October 28, 1995 to
March 31, 1996 for Oxford Automotive, Inc. and the consolidated statements of
operations, changes in shareholders' equity and cash flows for the period from
April 1, 1995 to October 27, 1995 and for the year ended March 31, 1995 for BMG
North America Limited. These financial statements are the responsibility of the
management of Oxford Automotive Inc. and BMG North America Limited. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of Oxford Automotive, Inc., as at
March 30, 1996 and the results of its operations and its cash flows for the
period from October 28, 1995 to March 31, 1996 and the results of BMG North
America Limited's operations and its cash flows for the period from April 1,
1995 to October 27, 1995 and for the year ended March 31, 1995 in accordance
with U.S. generally accepted accounting principles.
Deloitte & Touche
Chartered Accountants
Kitchener, Ontario
May 21, 1996
F-3
92
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
MARCH 31,
-------------------
1997 1996
---- ----
ASSETS
Current assets
Cash and cash equivalents................................. $ 9,671 $ --
Trade receivables -- less allowance of $1,272 and $39,
respectively........................................... 47,626 8,338
Inventories............................................... 13,411 3,719
Refundable income taxes................................... 1,641
Reimbursable tooling...................................... 4,968 3,298
Deferred income taxes..................................... 4,633
Prepaid expenses and other current assets................. 1,354 1,181
-------- -------
Total current assets................................... 83,304 16,536
Unexpended bond proceeds.................................... 3,937
Other noncurrent assets..................................... 4,588 6,734
Deferred income taxes....................................... 5,087 6,139
Property, plant and equipment, net.......................... 149,545 19,791
-------- -------
TOTAL ASSETS........................................... $246,461 $49,200
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable.................................... $ 31,421 $14,570
Employee compensation..................................... 4,986 1,883
Restructuring reserve..................................... 7,050 608
Accrued expenses and other current liabilities............ 9,040 3,299
Current portion of borrowings............................. 24,274 11,258
-------- -------
Total current liabilities.............................. 76,771 31,618
Pension liability........................................... 3,631 1,080
Postretirement medical benefits liability................... 33,467
Deferred income taxes....................................... 10,442
Restructuring reserve....................................... 2,767
Other noncurrent liabilities................................ 2,187 67
Long-term borrowings -- less current portion................ 75,555 15,500
-------- -------
Total liabilities...................................... 204,820 48,265
-------- -------
Commitments and contingent liabilities (Note 14)
Redeemable Series A $3.00 Cumulative Preferred Stock, $100
stated value -- 457,541 shares authorized, issued and
outstanding (Notes 3 and 12).............................. 36,012
-------- -------
Redeemable Series B Preferred Stock, $100 stated value --
49,938 shares authorized, issued and outstanding (Notes 3
and 12)................................................... 3,288
-------- -------
Shareholders' equity
Common stock, 400,000 shares authorized; 309,750 and
75,000, respectively, issued and outstanding........... 1,050 750
Foreign currency translation adjustment................... (28) 5
Retained earnings......................................... 1,572 415
Equity adjustment for minimum pension liability........... (253) (235)
-------- -------
2,341 935
-------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............. $246,461 $49,200
======== =======
The accompanying notes are an integral part of the financial statements.
F-4
93
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
COMPANY PREDECESSOR
---------------------------------- ----------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 28, 1995 APRIL 1, 1995
YEAR ENDED THROUGH THROUGH YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995 MARCH 31, 1995
-------------- ---------------- ---------------- --------------
Net sales............................ $136,861 $35,572 $49,043 $75,097
Cost of sales........................ 125,375 31,624 46,895 70,891
-------- ------- ------- -------
Gross profit....................... 11,486 3,948 2,148 4,206
Selling, general and
administrative..................... 7,685 2,235 3,922 4,554
-------- ------- ------- -------
Operating income (loss)............ 3,801 1,713 (1,774) (348)
Other income (expense)
Interest expense................... (3,388) (1,096) (1,048) (1,267)
Other income....................... 2,201
-------- ------- ------- -------
Income (loss) before (provision)
benefit for income taxes........... 2,614 617 (2,822) (1,615)
(Provision) benefit for income
taxes.............................. (1,065) (202) 938 349
-------- ------- ------- -------
Net income (loss).................... 1,549 415 $(1,884) $(1,266)
======= =======
Accrued dividends and accretion on
redeemable preferred stock......... 300 --
-------- -------
Net income applicable to common
stock.............................. $ 1,249 $ 415
======== =======
Net income per share................. $ 9.37 $ 9.10
======== =======
The accompanying notes are an integral part of the financial statements.
F-5
94
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA)
PREDECESSOR
-----------------------------------------------------------------
FOREIGN EQUITY
CURRENCY RETAINED ADJUSTMENT FOR
COMMON TRANSLATION EARNINGS MINIMUM PENSION
STOCK ADJUSTMENT (DEFICIT) LIABILITY TOTAL
------ ----------- --------- --------------- -----
Balances at April 1, 1994............... $14,609 $ -- $(2,203) $ -- $12,406
Net (loss).............................. (1,266) (1,266)
Foreign currency translation
adjustments........................... (186) 40 (146)
Issuance of common stock, net of
redemptions........................... (161) (161)
------- ----- ------- ----- -------
Balances at March 31, 1995.............. 14,262 40 (3,469) -- 10,833
Net (loss).............................. (1,884) (1,884)
Foreign currency translation
adjustments........................... 575 (155) 420
Issuance of common stock, net of
redemptions........................... (40) (40)
------- ----- ------- ----- -------
Balances at October 27, 1995............ $14,797 $(115) $(5,353) $ -- $ 9,329
======= ===== ======= ===== =======
COMPANY
-----------------------------------------------------------------
FOREIGN EQUITY
CURRENCY RETAINED ADJUSTMENT FOR
COMMON TRANSLATION EARNINGS MINIMUM PENSION
STOCK ADJUSTMENT (DEFICIT) LIABILITY TOTAL
------- ----------- --------- --------------- -------
Balances at October 28, 1995............ $ 750 $ -- $ -- $ -- $ 750
Net income............................ 415 415
Foreign currency translation
adjustments........................ 5 5
Equity adjustment for minimum pension
liability.......................... (235) (235)
------- ----- ------- ----- -------
Balances at March 31, 1996.............. 750 5 415 (235) 935
Net income............................ 1,549 1,549
Foreign currency translation
adjustments........................ (33) (33)
Equity adjustment for minimum pension
liability.......................... (18) (18)
Accrued dividends and accretion of
redeemable preferred stock......... (300) (300)
Issuance of common stock, net of
redemptions........................ 300 (92) 208
------- ----- ------- ----- -------
Balances at March 31, 1997.............. $ 1,050 $ (28) $ 1,572 $(253) $ 2,341
======= ===== ======= ===== =======
The accompanying notes are an integral part of the financial statements.
F-6
95
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA)
COMPANY PREDECESSOR
---------------------------------- ----------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 28, 1995 APRIL 1, 1995
YEAR ENDED THROUGH THROUGH YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995 MARCH 31, 1995
-------------- ---------------- ---------------- --------------
OPERATING ACTIVITIES
Net income (loss)........................ $ 1,549 $ 415 $ (1,884) $(1,266)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities
Depreciation and amortization.......... 5,041 687 919 1,413
Deferred income taxes.................. 2,136 230 (1,036) (385)
Gain on sale of equipment.............. (195) (2) (14)
Changes in operating assets and
liabilities affecting cash
Trade receivables.................... (8,953) 6,617 (3,311) (2,286)
Inventories.......................... (299) (277) (259) (635)
Reimbursable tooling................. (1,601) 1,824 (760) (3,170)
Prepaid expenses and other assets.... 129 1,592 (1,768) (553)
Other noncurrent assets.............. 3,544
Trade accounts payable............... (605) (6,501) 6,417 7,314
Employee compensation................ (6,072) 309 (493) (25)
Restructuring reserve................ (398)
Accrued expenses and other
liabilities........................ (1,885) (1,716) 3,504 110
Income taxes payable/refundable...... (199)
Other noncurrent liabilities......... (39)
-------- -------- -------- -------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES............ (7,847) 3,178 1,329 503
-------- -------- -------- -------
INVESTING ACTIVITIES
Purchase of business, net of cash
acquired............................... (9,309) (1,983)
Purchase of property, plant and
equipment.............................. (3,326) (3,466) (5,111) (4,384)
Proceeds from sale of equipment.......... 341 33 11 26
-------- -------- -------- -------
NET CASH USED IN INVESTING
ACTIVITIES...................... (12,294) (5,416) (5,100) (4,358)
-------- -------- -------- -------
FINANCING ACTIVITIES
Issuance of share capital................ 300 750
Proceeds from borrowing arrangements..... 78,823 23,814 921
Principal payments on borrowing
arrangements........................... (49,186) (16,482) (7,477) (1,182)
Redemption and retirement of common
stock.................................. (92) (40) (161)
Obligation under capital lease -- net.... (6) (3) 76
-------- -------- -------- -------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES............ 29,845 8,076 (6,599) (1,267)
-------- -------- -------- -------
Effect of exchange rate changes on
cash................................... (33)
-------- -------- -------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 9,671 5,838 (10,370) (5,122)
Cash and cash equivalents at beginning of
period................................. (11,238) (868) 4,254
-------- -------- -------- -------
Cash and cash equivalents at end of
period................................. $ 9,671 $ (5,400) $(11,238) $ (868)
======== ======== ======== =======
Cash paid for interest................... $ 3,033 $ 1,096 $ 1,048 $ 1,267
======== ======== ======== =======
Cash paid for income taxes............... $ -- $ 42 $ 79 $ 113
======== ======== ======== =======
The accompanying notes are an integral part of the financial statements.
F-7
96
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA)
NOTE 1. NATURE OF OPERATIONS
Oxford Automotive, Inc. (the Company) is a full-service supplier of metal
stampings and welded assemblies used as original equipment components primarily
by North American original equipment automotive manufacturers. The Company's
products are used in a wide variety of sport utility vehicles, light and medium
trucks, vans and passenger cars. The Company primarily operates from seven
plants located in the United States and Canada. The Company's hourly workforce
is represented by various locals of the United Auto Workers.
Net sales to the Company's two primary customers as a percentage of total
sales are as follows:
COMPANY PREDECESSOR
---------------------------------- ----------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 28, 1995 APRIL 1, 1995
YEAR ENDED THROUGH THROUGH YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995 MARCH 31, 1995
-------------- ---------------- ---------------- --------------
Ford Motor Company................. 17% -- -- --
General Motors Corporation......... 62% 67% 69% 70%
Accounts receivable from Ford Motor Company and General Motors Corporation
represent approximately 30% and 60%, respectively, of the March 31, 1997
accounts receivable balance.
Although the Company is directly affected by the economic well being of the
automotive industry and customers referred to above, management does not believe
significant credit risk exists at March 31, 1997. The Company does not require
collateral to reduce such risk and historically has not experienced significant
losses related to receivables from individual customers or groups of customers
in the automotive industry.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements for the period from April 1, 1995 through October
27, 1995 and for the year ended March 31, 1995 are those of BMG North America
Limited (the Predecessor), which was acquired by Oxford Automotive, Inc.
(formerly BMG-MI, Inc.) on October 28, 1995, as discussed further in Note 3.
The consolidated financial statements as of March 31, 1997 and 1996 and for
the year ended March 31, 1997 and for the period from October 28, 1995 through
March 31, 1996 are those of the Company and its subsidiaries. The financial
statements of the Company and Predecessor are not comparable in certain respects
due to differences between the cost bases of certain assets held by the Company
versus that of the Predecessor, resulting in reduced depreciation and
amortization charges subsequent to October 27, 1995, changes in accounting
policies and the recording of certain liabilities at the date of acquisition in
connection with the purchase of the Predecessor by the Company, as well as the
Company's acquisition of Lobdell Emery Corporation and its wholly-owned
subsidiaries on January 10, 1997, as discussed further in Note 3.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts
of Oxford Automotive, Inc. and its wholly-owned subsidiaries, BMG Holdings, Inc.
and Lobdell Emery Corporation. The accounts of BMG Holdings, Inc. (BMGH) consist
of BMGH and its wholly-owned subsidiaries, BMG North America Limited (BMGNA) and
BMGNA's two wholly-owned subsidiaries, 829500 Ontario Limited and 976459 Ontario
Limited. The accounts of Lobdell Emery Corporation (Lobdell) consist of Lobdell
and its wholly-owned subsidiaries, Lewis Emery Capital Corporation (Lewis),
Concept Management Corporation and subsidiaries (Concept), Laserweld
International (Laserweld) and Parallel Group International (Parallel). Concept
F-8
97
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Management Corporation also includes the accounts of its wholly-owned
subsidiaries, Winchester Fabrication Corporation (Winchester) and Creative
Fabrication Corporation (Creative). Intercompany accounts and transactions have
been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized by the Company upon shipment of product to the
customer.
Financial Instruments
At March 31, 1997 and 1996, the carrying amount of financial instruments
such as cash and cash equivalents, trade receivables and payables and unexpended
bond proceeds, approximated their fair values. The carrying amount of the
long-term customer receivables and borrowings at March 31, 1997 and 1996,
approximated their fair values based on the variable interest rates available to
the Company for similar arrangements.
Cash Equivalents
The Company considers all highly-liquid investments with maturity of three
months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is principally
determined by the last-in, first-out (LIFO) method for the Company's United
States operations and by the first-in first-out (FIFO) method for the Company's
Canadian operations.
Reimbursable Tooling
Reimbursable tooling represents net costs incurred on tooling projects for
which the Company expects to be reimbursed by customers. Ongoing estimates of
total costs to be incurred on each tooling project are made by management and
losses, if any, are recorded when known. Generally, tooling revenue is
recognized upon acceptance of the tooling by the customer. Certain of the
Company's tooling costs are financed through lending institutions and are
reimbursed by vendors on a piece price basis. These tooling assets are
classified as either accounts receivable ($3,695 and $1,809 at March 31, 1997
and 1996, respectively), other noncurrent assets ($3,800 and $6,734 at March 31,
1997 and 1996, respectively) or equipment depending upon the ultimate title
holder of the tooling assets.
Unexpended Bond Proceeds
Unexpended bond proceeds in the accompanying consolidated balance sheet
represent unexpended proceeds from the issuance of industrial development
revenue bonds by Creative as discussed in Note 7, and are invested in allowable
money market accounts and commercial paper with a maturity of 30 days or less.
F-9
98
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost and include
expenditures for improvements which materially increase the useful lives of
existing assets. Expenditures for normal repair and maintenance are charged to
operations as incurred. For federal income tax purposes, depreciation is
computed using accelerated and straight-line methods. For financial reporting
purposes, depreciation is computed principally using the straight-line method
over the following estimated useful lives:
YEARS
-----
Land improvements........................................... 15
Buildings................................................... 30-40
Machinery and equipment..................................... 3-20
Impairment of Long-Lived Assets
The Company accounts for long-lived assets in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This Statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. The Company measures the impairment of long-lived assets by
comparing the undiscounted future cash flows to be generated by the assets to
their carrying value.
Environmental Compliance and Remediation
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations which do not contribute to current or future revenue
generation are expensed. Liabilities are recorded when environmental assessments
and/or remedial efforts are probable and the costs can be reasonably estimated.
Estimated costs are based upon enacted laws and regulations, existing technology
and the most probable method of remediation. The costs determined are not
discounted and exclude the effects of inflation and other social and economic
factors.
Income Taxes
Deferred taxes are provided to give recognition to the effect of expected
future tax consequences of temporary differences between the carrying amounts
for financial reporting purposes and the tax bases for income tax purposes of
assets and liabilities.
Foreign Exchange Contracts
Gains and losses of foreign currency firm commitment hedges are deferred
and included in the basis of the transactions underlying the commitments. During
fiscal 1997, the Company recognized a gain of approximately $2,000 related to
certain foreign currency exchange transactions terminated during the year. The
gain is included as a component of other income in the accompanying March 31,
1997 statement of operations. Had the foreign currency exchange transactions not
been terminated, the recognized gain would normally have been recorded as a
component of sales.
Foreign Currency Translation
The foreign currency financial statements of BMGH, where the local currency
is the functional currency, are translated using exchange rates in effect at
period end for assets and liabilities and at weighted average
F-10
99
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
exchange rates during the period for operating statement accounts. The resulting
foreign currency translation adjustments are recorded as a separate component of
shareholders' equity. Exchange gains and losses resulting from foreign currency
transactions are included in operating results during the period in which they
occur.
Per Share Amounts
Predecessor period per share amounts have not been presented as the
Company's capital structure is not comparable to that of the Predecessor.
Reclassifications
Certain amounts from the prior year have been reclassified to conform with
the current year presentation.
NOTE 3. ACQUISITIONS
On October 28, 1995, the Company acquired all of the outstanding common
stock of the Predecessor. The acquisition was financed through a $750 Series A
promissory note. The acquisition has been recorded in accordance with the
purchase method of accounting. Accordingly, the purchase price plus direct cost
of the acquisition have been allocated to the assets acquired and liabilities
assumed based on their estimated fair values at the date of acquisition.
On January 10, 1997, pursuant to an Agreement and Plan of Merger among
Lobdell Emery Corporation, certain shareholders of Lobdell Emery Corporation,
BMG-MI, Inc. and L-E Acquisition, Inc. as amended (the Agreement), certain
Lobdell Emery Corporation shareholders and option holders had their respective
shares and options redeemed for cash of approximately $8,500 and all outstanding
shares of common stock of Lobdell Emery Corporation (Oldco) were exchanged for
shares of preferred stock of L-E Acquisition, Inc. with a face value of
approximately $40,700. In addition, approximately $3,500 of expenses incurred by
Oldco were reimbursed by L-E Acquisition, Inc. Subsequent to the exchange of
Oldco's common stock for preferred stock, L-E Acquisition, Inc. was merged with
and into Lobdell Emery Corporation (Newco).
The acquisition was financed through the issuance of preferred stock
described in Note 12 and the term loan described in Note 7. The acquisition has
been recorded in accordance with the purchase method of accounting. Accordingly,
the purchase price plus direct cost of the acquisition have been allocated to
the assets acquired and liabilities assumed based on their estimated fair values
at the date of acquisition. In accordance with the purchase method of
accounting, Lobdell's operating results have been included with those of the
Company since the date of acquisition.
The Agreement provides for a purchase price adjustment, depending on net
worth on January 10, 1997, to the face value of Series A Preferred Stock, not to
exceed $10,000, issued by the Company to the former shareholders of Lobdell in
connection with the acquisition. The Company and former shareholders of Lobdell
are currently in negotiations as to the purchase price adjustment related to net
worth with 100,000 shares of issued Series A Preferred Stock held in escrow. The
Company expects the entire 100,000 shares ($10,000) will be returned to the
Company and canceled in accordance with the Agreement. Any adjustment to the
purchase price resulting from the aforementioned negotiations will be allocated
to the assets acquired or goodwill.
On July 15, 1997 the Company entered into a Settlement Agreement and Mutual
Release with the preferred shareholders of Lobdell (the Settlement Agreement).
The terms of the Settlement Agreement provide for the cancellation of 60,000
shares of Series A Preferred Stock held in escrow and the cancellation of either
the remaining 40,000 shares of Series A Preferred Stock held in escrow or, at
the election of the preferred shareholders, 49,938 shares of Series B Preferred
Stock. The cancellation of Series A Preferred
F-11
100
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. ACQUISITIONS -- (CONTINUED)
Stock shares will have no effect on the book value of the assets acquired.
However, the cancellation of Series B Preferred Stock shares will increase both
redeemable preferred stock and the book value of the assets acquired.
The following unaudited pro forma consolidated results of operations have
been prepared as if the acquisition of Lobdell had occurred at the beginning of
fiscal 1997 and 1996.
PERIOD FROM
OCTOBER 28, 1995
YEAR ENDED THROUGH
MARCH 31, 1997 MARCH 31, 1996
-------------- ----------------
Net sales................................................... $ 330,164 $ 150,776
Net loss.................................................... $ (7,090) $ (938)
Net loss applicable to common stock......................... $ (8,460) $ (2,308)
Net loss per share from continuing operations............... $ (27.32) $ (7.45)
The pro forma information is not intended to be a projection of future
results.
The pro forma information included above includes adjustments for increased
depreciation expense, net of the related tax benefit of $550 and $290 for the
year ended March 31, 1997 and for the period from October 28, 1995 through March
31, 1996, respectively.
NOTE 4. INVENTORIES
Inventories are comprised of the following at March 31:
1997 1996
---- ----
Raw materials............................................... $ 1,604 $1,557
Finished goods and work-in-process.......................... 11,861 2,162
------- ------
13,465 3,719
LIFO reserve................................................ (54)
------- ------
$13,411 $3,719
======= ======
The Company does not separately identify finished goods from
work-in-process.
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following at March 31:
1997 1996
---- ----
Land and land improvements.................................. $ 5,073 $ 779
Buildings................................................... 26,124 3,171
Machinery and equipment..................................... 118,875 7,394
Construction-in-process..................................... 4,393 8,914
-------- -------
154,465 20,258
Less -- accumulated depreciation............................ (4,920) (467)
-------- -------
$149,545 $19,791
======== =======
F-12
101
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are comprised of the
following at March 31:
1997 1996
---- ----
Accrued workers' compensation............................... $3,071 $ 544
Accrued property taxes...................................... 2,350
Accrued medical benefits.................................... 1,827
Foreign exchange gain....................................... 1,975
Other....................................................... 1,792 780
------ ------
$9,040 $3,299
====== ======
NOTE 7. BORROWING ARRANGEMENTS
Borrowings consist of the following at March 31:
1997 1996
---- ----
BANK SYNDICATE -- TERM LOAN, LOBDELL EMERY CORPORATION
Interest at variable spread over prime (7.44% at March 31,
1997). Quarterly principal payments ranging from
$1,250-$2,750 plus interest, with $13,750 due December 31,
2001...................................................... $ 52,750 $ --
BANK SYNDICATE -- REVOLVING CREDIT LINE, LOBDELL EMERY
CORPORATION
Interest at variable spread over prime (9% at March 31,
1997), matures January 10, 2002........................... 1,250
INDUSTRIAL DEVELOPMENT REVENUE BONDS, CREATIVE
$8,500 issued September 27, 1995, floating rate interest
(3.6% at March 31, 1997). Quarterly principal payments
based on graduated maturity schedule. Backed by NBD Bank
letter of credit.......................................... 8,300
BANK SYNDICATE -- TERM LOAN, BMGNA
Interest at prime rate plus 1.25% (6% at March 31, 1997).
Quarterly payments of $755 plus interest, matures February
28, 2002.................................................. 14,447
REVOLVING CREDIT LINE, BMGNA
Interest at prime rate plus 1.25% (6% at March 31, 1997),
matures February 28, 2002................................. 10,376
BANK -- TERM LOAN, LEWIS
Interest at .625% over 90-day LIBOR (6.19% at March 31,
1997). Quarterly principal payments of approximately $400,
matures October 1, 1998................................... 2,833
NATIONS BANK -- SATURN TOOLING, BMGNA
Interest at a variable spread over prime (8.71% at March 31,
1997). Payments based on parts shipped, matures November
30, 1998.................................................. 1,380 7,047
EDC TOOLING LOAN, BMGNA
Interest at a fixed rate of 7.36%. Payments based on parts
shipped, matures September 30, 1999....................... 5,110
CCFL LOAN, BMGNA
Interest at 11.11%. Monthly principal payments of $21,
matures October 31, 2000.................................. 2,475 2,768
F-13
102
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. BORROWING ARRANGEMENTS -- (CONTINUED)
1997 1996
-------- --------
IRDP LOAN, BMGNA
Interest at 6%. Monthly principal payments of $7 to October
31, 2000 and $11 thereafter, matures September 1, 2002.... 467 534
TERM LOAN, BMGNA
Interest at Canadian Index Rate plus 3% or Canadian Banker's
Acceptance Rate plus 3.95%. Quarterly principal payments
based on graduated schedule, repaid in full during fiscal
1997...................................................... 7,765
REVOLVING CREDIT LINE, BMGNA
Interest at Canadian Banker's Acceptance Rate plus 3.7%,
repaid in full during fiscal 1997......................... 2,803
BANK LOAN, BMGNA
Interest at either the Canadian Index Rate plus 2.5% or BA
rate plus 3.45%, repaid in full during fiscal 1997........ 2,650
TOOLING LINE, BMGNA
Interest at the Canadian Index Rate plus 3% or the Canadian
Banker's Acceptance Rate plus 3.95%, repaid in full during
fiscal 1997............................................... 2,750
SERIES A PROMISSORY NOTE, BMGH
Interest at 7%, matures October 26, 2001.................... 441 441
-------- --------
Total.................................................. 99,829 26,758
Less -- current portion of long-term borrowings............. (24,274) (11,258)
-------- --------
Long-term borrowings -- less current portion................ $ 75,555 $ 15,500
======== ========
On January 10, 1997, Lobdell entered into a credit agreement with a
syndicate of banks (the Lobdell Credit Agreement), under which Lobdell may
borrow up to $110,000, including a term loan of $54,000, a revolving credit line
of $38,000, a capital expenditure note of $18,000 and a swingline note of
$3,000. At March 31, 1997, no borrowings were outstanding under the capital
expenditure note or swingline note.
The terms of the Lobdell Credit Agreement contain, among other provisions,
requirements for maintaining defined levels of tangible net worth, funded debt
to cash flows and cash flow coverage. The Lobdell Credit Agreement also contains
certain restrictions on the payment of dividends. Quarterly commitment fees
ranging from .25% to .40% are required to be paid on the unused amounts of the
revolving credit line and the capital expenditure note. Borrowings are secured
by substantially all assets of Lobdell. At March 31, 1997, borrowings supported
by the combined lines of credit totaled $1,250, leaving $54,750 unused and
available.
The proceeds of the industrial development revenue bonds were used to
finance the real and personal property of Creative. These bonds are backed by an
NBD letter of credit, which carries a rate of 1.50% and is collateralized by
substantially all assets of Creative. The letter of credit reimbursement
agreement includes covenants requiring minimum tangible capital, debt service
coverage and limitations on other indebtedness.
On February 11, 1997, BMGNA entered into a credit agreement with a
syndicate of banks (the BMGNA Credit Agreement) under which BMGNA may borrow up
to $46,000, including a term loan of $20,000, a revolving credit line of
$23,000, a capital expenditure note of $3,000 and a swingline note of $3,000. At
March 31, 1997, no borrowings were outstanding under the revolving credit line,
capital expenditure note or swingline note.
F-14
103
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. BORROWING ARRANGEMENTS -- (CONTINUED)
The terms of the BMGNA Credit Agreement contain, among other provisions,
requirements for maintaining defined levels of tangible net worth, funded debt
to cash flows and cash flow coverage. The BMGNA Credit Agreement also contains
certain restrictions on the payment of dividends. Quarterly commitment fees
ranging from .35% to .50% are required to be paid on the unused amounts of the
revolving credit line and the capital expenditure note. Borrowings are secured
by substantially all assets of BMGNA.
The Bank -- term loan, Lewis, Nations Bank -- Saturn tooling, BMGNA and EDC
tooling loan, BMGNA are used to finance customer tooling. These loans are
collateralized by either a customer purchase order or the tooling assets.
The CCFL loan represents a term loan payable through October 31, 2000 which
is secured by substantially all the assets of BMGNA.
Aggregate maturities of long-term borrowings at March 31, 1997 are as
follows:
1998........................................................ $24,274
1999........................................................ 14,886
2000........................................................ 13,687
2001........................................................ 16,975
2002........................................................ 27,206
Thereafter.................................................. 2,801
-------
$99,829
=======
NOTE 8. INCOME TAXES
The Company's income tax provision (benefit) consists of the following:
COMPANY PREDECESSOR
--------------------------------- ---------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 28, 1995 APRIL 1, 1995
YEAR ENDED THROUGH THROUGH YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995 MARCH 31, 1995
-------------- ---------------- ---------------- --------------
Current
Federal.......................... $ (821) $ -- $ -- $ --
State............................ (124)
Foreign.......................... 34 46 49
------ ------ ------- -----
(945) 34 46 49
------ ------ ------- -----
Deferred
Federal.......................... 899
State............................ 137
Foreign.......................... 974 168 (984) (398)
------ ------ ------- -----
2,010 168 (984) (398)
------ ------ ------- -----
$1,065 $202 $(938) $(349)
====== ====== ======= =====
F-15
104
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. INCOME TAXES -- (CONTINUED)
The difference between the statutory rate and the Company's effective rate
was as follows:
COMPANY PREDECESSOR
---------------------------------- ----------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 28, 1995 APRIL 1, 1995
YEAR ENDED THROUGH THROUGH YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995 MARCH 31, 1995
-------------- ---------------- ---------------- --------------
Statutory rate....................... 34.0% 36.0% 36.0% 36.0%
Foreign rates varying from 34%....... 1.8
Large corporation tax................ (2.8) (1.6) (3.1)
State taxes, net of federal
benefit............................ .3
Nondeductible items.................. 4.1 (.5) (1.2) (11.3)
Other................................ .5
---- ----- ----- -----
Effective income tax rate............ 40.7% 32.7% 33.2% 21.6%
==== ===== ===== =====
Significant components of the Company's deferred tax assets and
(liabilities) are as follows at March 31:
1997 1996
---- ----
Deferred tax liabilities
Tax depreciation in excess of book........................ $(30,065) $ --
Inventory reserve......................................... (1,292)
-------- ------
Gross deferred tax liabilities.............................. (31,357)
-------- ------
Deferred tax assets
Postretirement medical benefits........................... 13,387
Impairment reserve........................................ 1,200
Workers' compensation..................................... 1,089
Medical benefits accrual.................................. 702
Allowance for bad debts................................... 502
AMT credit carryforward................................... 3,000
Pension benefits.......................................... 1,606 498
Net operating loss carryforwards.......................... 2,905 3,066
Book depreciation in excess of tax........................ 989
Restructuring reserve..................................... 3,927 311
Foreign exchange.......................................... 46 696
Other..................................................... 2,471 579
-------- ------
Gross deferred tax assets................................. 30,835 6,139
-------- ------
Valuation allowance......................................... (200)
-------- ------
Net deferred tax asset (liability).......................... $ (722) $6,139
======== ======
A valuation allowance is provided on the tax benefits otherwise associated
with certain tax attributes unless it is considered more likely than not that
the benefit will be realized.
The Company has net operating loss carryforwards for Canadian income tax
purposes with potential future tax benefits of approximately $2,900 at March 31,
1997. The Canadian net operating losses have the ability to be carried forward
indefinitely. In addition, the Company has Alternative Minimum Tax credit
carryforwards aggregating $3,000 at March 31, 1997, which can be carried forward
indefinitely.
F-16
105
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. INCOME TAXES -- (CONTINUED)
The Company has net operating loss carryforwards with a potential future
tax benefit of approximately $150 for state income tax purposes and Tennessee
Jobs Tax Credit carryforwards of approximately $200 at March 31, 1997, both of
which expire during the years 2010 and 2011.
NOTE 9. RESTRUCTURING RESERVES
In connection with the acquisition of Lobdell described in Note 3,
management began to formulate and assess a plan to exit certain activities of
Lobdell and accordingly established certain restructuring reserves aggregating
$9,817 in Lobdell's opening balance sheet. Currently, management's restructuring
plan includes the sale of certain subsidiaries, closure of a Lobdell owned
manufacturing facility and sale of the current Lobdell owned corporate offices.
Included in the restructuring reserves at March 31, 1997 are the following
costs: severance and benefits for employees to be relocated and terminated
($5,052), net of writedown of facilities and certain equipment to fair market
value, less disposal costs ($2,767), and other restructuring related costs
($1,998). The effect of these initiatives is currently expected to result in the
termination of approximately 250 employee positions.
Management continues to assess the future manufacturing capacity and
corporate office requirements of the Company and expects to complete its
assessment and finalization of the restructuring plan within one year of the
acquisition date of Lobdell.
As noted above, in connection with the Company's restructuring activities,
certain employees of Lobdell were terminated. The termination of certain of
these employees resulted in a postretirement medical benefit curtailment gain of
$957 which, in accordance with the purchase method of accounting, was treated as
a reduction in liabilities assumed at the acquisition date. Accordingly, no
postemployment medical benefit curtailment gain has been recognized in the
Company's statement of operations for the year ended March 31, 1997.
NOTE 10. BENEFIT PLANS
The Company sponsors eight noncontributory plans and one contributory
defined benefit pension plan covering substantially all employees meeting the
age and length of service requirements as specified in the plans. The plan
covering salaried employees provides pension benefits that are based on a
percentage of the employee's average monthly compensation during the five
highest consecutive years out of their last ten years, and their years of
credited service up to a maximum of 30 years. The hourly plans do not provide
for increases in future compensation levels. The Company's funding policy for
this plan is to make contributions in amounts sufficient to annually fund the
plan's current service cost and the initial past service cost, plus interest,
over a period of 30 years. Plans covering hourly employees generally provide
benefits of stated amounts based on their unique labor agreements for each year
of service. The Company's funding policy for these plans is to make at least the
minimum annual contributions required by applicable regulations.
F-17
106
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. BENEFIT PLANS -- (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized on the Company's balance sheets at March 31:
OVERFUNDED PLANS UNDERFUNDED PLANS
------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
Actuarial present value of benefit obligation
Vested benefits.................................... $ 17,573 $ 2,376 $ 34,106 $ 11,539
Nonvested benefits................................. 1,170 74 1,853 356
-------- ------- -------- --------
18,743 2,450 35,959 11,895
Effect of projected future compensation levels....... 4,060 1,285
-------- ------- -------- --------
Projected benefit obligation for service rendered.... 22,803 3,735 35,959 11,895
Plan assets at fair value (primarily U.S. government
securities, bonds and notes and mutual funds)...... (22,854) (4,155) (32,280) (10,525)
-------- ------- -------- --------
Plan assets less (greater) than projected benefit
obligation......................................... (51) (420) 3,679 1,370
Unrecognized net loss, including asset gains/losses
not yet reflected in market values................. 10 (21)
Unrecognized prior service cost...................... (20)
Unrecognized net obligation being recognized over
15-20 years........................................ 15
Experience gains (losses)............................ (61) 125 (392) (363)
Adjustment required to recognize minimum liability... 472 368
-------- ------- -------- --------
(Prepaid) accrued pension cost....................... $ (87) $ (295) $ 3,718 $ 1,375
======== ======= ======== ========
The minimum pension liability in excess of the allowable intangible asset
has been recorded as a separate component of equity, net of tax.
F-18
107
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. BENEFIT PLANS -- (CONTINUED)
Net periodic pension cost for each year and the actuarial assumptions used
in determining the projected benefit obligation were as follows:
COMPANY PREDECESSOR
---------------------------------- ----------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 28, 1995 APRIL 1, 1995
YEAR ENDED THROUGH THROUGH YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995 MARCH 31, 1995
-------------- ---------------- ---------------- --------------
Service cost......................... $ 1,074 $ 266 $ 344 $ 519
Interest cost........................ 2,127 530 697 1,005
Expected return on assets............ (2,138) (425) (533) (847)
Net amortization and deferral........ 15 60 36
------- ------- ------- ------
Net periodic pension cost............ $ 1,078 $ 371 $ 568 $ 713
======= ======= ======= ======
Discount rate
Lobdell............................ 7.75% -- -- --
BMGH............................... 8.00% 8.50% 8.75% 9.50%
Expected return on assets
Lobdell............................ 9.00% -- -- --
BMGH............................... 8.50% 8.50% 7.50% 7.50%
Salary progression
Lobdell............................ 4.50% -- -- --
BMGH............................... 5.50% 5.50% 5.50% 5.50%
The Company sponsors five defined contribution 401(k) plans. The Salaried
Employees' Retirement Savings Plan covers all salaried employees of Lobdell and
Winchester. The Alma Hourly Employees' Retirement Savings Plan, the Argos Hourly
Employees' Retirement Savings Plan, the Creative Fabrication Corporation and the
Greencastle Hourly Employees' Plan cover all eligible hourly employees at the
respective locations. The Company generally contributes 25% of the first 6% of
the base compensation that a participant contributes to the plans.
NOTE 11. POSTRETIREMENT MEDICAL BENEFITS
In addition to the Company's defined benefit pension plans, Lobdell
sponsors unfunded defined benefit medical plans that provide postretirement
medical benefits to certain full-time employees meeting the age, length of
service and contractual requirements as specified in the plans. The plan
covering salaried employees is a contributory plan providing medical benefits to
those hired before July 1, 1993. The percentage of cost paid by the retiree
currently ranges from 10% for 30 or more years of service at retirement to 55%
for 15 years of service at retirement, with Company contributions commencing
upon attainment of age 62. Those retiring with less than 15 years of service and
those hired after June 30, 1993 may participate in the plan at their own cost.
The plan is currently noncontributory for those employees who retired prior to
July 1, 1993. The plans covering hourly employees provide medical benefit plan
options that are similar to those offered to active hourly employees, with
Lobdell contributions limited either to that available under traditional
coverage for Alma hourly retirees or to 87% of the total applicable premium for
Greencastle retirees.
F-19
108
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. POSTRETIREMENT MEDICAL BENEFITS -- (CONTINUED)
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's balance sheet.
MARCH 31,
1997
---------
Accumulated postretirement benefit obligation
Retirees.................................................. $14,479
Full eligible active plan participants.................... 4,287
Other active plan participants............................ 13,510
-------
Total unfunded obligation................................. 32,276
Unrecognized gain........................................... 1,191
-------
Postretirement medical benefits liability................... $33,467
=======
Net periodic postretirement benefit cost for the period from January 10,
1997 to March 31, 1997 included the following components:
Service cost -- benefits earned during the period........... $272
Interest cost on the accumulated postretirement benefit
obligation................................................ 623
----
Net periodic postretirement benefit cost.................... $895
====
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.75%. The weighted average annual assumed
rate of increase in the per capita cost of covered benefits (i.e., healthcare
cost trend rate) is 8.8% in 1997 trending to 6.5% in 2008 and thereafter for
retirees less than 65 years of age. For retirees 65 years of age and over, the
rate is 8.5% in 1997 trending to 6.5% in 2008 and thereafter. The healthcare
cost trend rate assumption has a significant effect on the amounts reported. For
example, increasing the assumed healthcare cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of March 31, 1997 by approximately $4,624 and net periodic
postretirement benefit cost for the period from January 10, 1997 to March 31,
1997 by approximately $140.
NOTE 12. REDEEMABLE PREFERRED STOCK
In connection with the acquisition of Lobdell described in Note 3,
redeemable preferred stock with a face value of $50,748 was issued. Redeemable
preferred stock with a face value of $40,748 was delivered to the former
shareholders of Lobdell on January 10, 1997. The remaining redeemable preferred
stock with a face value of $10,000 was placed in escrow pending final
determination of the purchase price. See Note 3 for a discussion of the
settlement reached with the preferred shareholders of Lobdell and the subsequent
cancellation of certain shares of redeemable preferred stock. The preferred
stock issuance consisted of 457,541 shares of Series A $3.00 Cumulative
Preferred Stock (Series A Preferred) and 49,938 shares of Series B Preferred
Stock (Series B Preferred). The annual dividend on the Series A Preferred is
$3.00 per share, payable semi-annually. Dividends on the Series A Preferred are
cumulative, but do not bear interest. The Series B Preferred does not provide
for dividends or interest.
Under the terms of the issuance of the Series A Preferred and the Series B
Preferred (Stock Agreement), the holders of the Series A Preferred and Series B
Preferred maintain limited voting rights. Holders are entitled to vote on any
provisions that would adversely affect the rights or privileges of the Series A
Preferred or Series B Preferred holders or management's plans to issue any
equity securities that would rank prior to the Series A Preferred. Holders of
the Series A Preferred are entitled to elect at least one director of Lobdell,
which, under certain provisions of the Stock Agreement, may increase to two.
F-20
109
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. REDEEMABLE PREFERRED STOCK -- (CONTINUED)
Lobdell is required to redeem all shares of Series A Preferred and Series B
Preferred on December 31, 2006 at a price of $100 per share, plus all declared
or accumulated but unpaid dividends on the Series A Preferred. If Oxford does
not commence an initial public offering of common stock (IPO) prior to June 30,
2006, then the redemption price of the Series A Preferred is $103 per share. If
an IPO does not occur by December 31, 2001, each holder of Series A Preferred
has the option to redeem annually a maximum of 20 percent of the shares held at
a price of $100 per share on each December 31, beginning in 2002.
Series A Preferred and Series B Preferred holders are not allowed to
transfer, sell or assign the shares prior to February 1, 1999. Subsequent to
that date, Lobdell has the right of first refusal to purchase any of the shares
transferred, sold or assigned by a holder of Series A Preferred or Series B
Preferred.
Holders of Series A Preferred are entitled to convert their shares to
Oxford common stock issued in connection with an IPO. Individual Series A
Preferred holders may convert a maximum of 50% of their shares, but the total of
all Series A Preferred shares converted may not exceed 25% of the total Series A
Preferred shares outstanding.
The Series B Preferred shares have been discounted, as the redemption price
of $100 per share was greater than the fair value of the shares at issuance. The
recorded value will be accreted to the redemption value at the time redemption
first becomes available.
The Series A Preferred and Series B Preferred have been included in the
accompanying consolidated balance sheet at their respective fair values at the
date of issuance of $35,754 and $3,246, respectively, and have been adjusted for
accrued dividends and accretion of $258 and $42 respectively.
NOTE 13. RELATED PARTY TRANSACTIONS
The Company is charged a fee by a related party, The Oxford Investment
Group, Inc., for consulting, finance and management services. Fees charged to
the Company by The Oxford Investment Group, Inc. approximated $275 for the year
ended March 31, 1997. In connection with the acquisitions of BMGNA and Lobdell,
investment banking fees of $200 and $300, respectively, were paid to The Oxford
Investment Group, Inc.
NOTE 14. COMMITMENTS AND CONTINGENCIES
Operating Leases
As of March 31, 1997, the Company had long-term operating leases covering
certain machinery and equipment. The minimum rental commitments under
noncancellable operating leases with lease terms in excess of one year are as
follows as of March 31, 1997:
1998........................................................ $ 4,695
1999........................................................ 2,813
2000........................................................ 3,159
2001........................................................ 1,140
2002........................................................ 3,088
-------
$14,895
=======
Environmental Matters
The Company is subject to federal, state and local laws and regulations
which govern environmental matters. These laws regulate the discharge of
materials into the environment and may require the Company to remove or mitigate
the environmental effects of the disposal or release of petroleum or chemical
substances.
F-21
110
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
The Company has identified several environmental matters resulting from prior
operations. Due to the relatively early stage of investigation of certain of
these identified matters as well as potential indemnification by other
potentially responsible parties, management is unable to reasonably estimate the
ultimate cost of remediating certain of these identified environmental matters.
At March 31, 1997, the Company has a liability of approximately $880 recorded
for estimated costs of known environmental matters.
General
The Company is subject to various claims, lawsuits and administrative
proceedings related to matters arising out of the normal course of business. In
the opinion of management, after reviewing the information which is currently
available with respect to such matters and consulting with legal counsel, any
liability which may ultimately be incurred with respect to these matters will
not materially affect the financial position, results of operations or cash
flows of the Company.
NOTE 15. SUBSEQUENT EVENT
On May 21, 1997, the Company signed a definitive Agreement and Plan of
Merger (the Merger Agreement) pursuant to which it will acquire (the Merger)
Howell Industries, Inc., a Michigan corporation (Howell).
Howell is a manufacturer of high-quality welded subassemblies and detailed
stampings used as OEM components, primarily in suspension system applications,
in the production of light trucks, SUVs, mini-vans, vans and passenger cars.
Pursuant to the Merger Agreement, the shareholders of Howell will receive
approximately $23,400 in cash. The Company also executed a Shareholder Agreement
pursuant to which it has received from the principal shareholder an option to
purchase its shares, which constitute approximately 32.6% of the issued and
outstanding shares of common stock of Howell (the Shares), at any time prior to
December 31, 1997, together with its agreement to vote all such Shares in favor
of the Merger.
The acquisition will be accounted for by the purchase method. Accordingly,
the results of operations of the acquired company will be included with those of
the Company for periods subsequent to the date of acquisition. Howell had net
sales of $79,211 and net income of $475 for the year ended July 31, 1996.
The unaudited pro forma combined condensed balance sheet of the Company and
Howell as of March 31, 1997 after giving effect to certain pro forma adjustments
is as follows:
ASSETS
Current assets.............................................. $108,419
Property and equipment, net................................. 165,431
Other assets................................................ 14,462
Goodwill.................................................... 2,013
--------
$290,325
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities......................................... $ 94,097
Other liabilities........................................... 154,587
Redeemable preferred stock.................................. 39,300
Shareholders' equity........................................ 2,341
--------
$290,325
========
F-22
111
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The unaudited pro forma combined results of operations of the Company
(including Lobdell from January 11, 1997 through March 31, 1997) and Howell for
the year ended March 31, 1997 after giving effect to certain pro forma
adjustments are as follows:
Net sales................................................... $228,404
========
Net income.................................................. $ 1,158
========
Net income applicable to common shares...................... $ 858
========
Net income per common share................................. $ 6.44
========
The foregoing unaudited pro forma results of operations reflect adjustments
for additional interest expense related to the financing of the acquisition and
the additional depreciation expense, as a result of the write-up of property,
plant and equipment, net of the related tax benefit.
F-23
112
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Lobdell Emery Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in shareholders'
equity and of cash flows after the restatement discussed in Note 16 present
fairly, in all material respects, the financial position of Lobdell Emery
Corporation and its subsidiaries (the Corporation) at December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Corporation's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As described in Note 15, on January 10, 1997 all of the outstanding shares
of common stock of the Corporation were sold to L-E Acquisition, Inc.
Price Waterhouse LLP
Detroit, Michigan
May 19, 1997
F-24
113
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
DECEMBER 31,
--------------------
1996 1995
---- ----
ASSETS
Current assets
Cash and cash equivalents................................. $ 278 $ 716
Trade receivables -- less allowance of $1,254 and $500,
respectively........................................... 28,769 32,514
Inventories............................................... 6,083 10,212
Income taxes receivable................................... 1,282
Reimbursable tooling...................................... 47 407
Deferred income taxes..................................... 3,081 3,038
Prepaid expenses and other current assets................. 191 827
-------- --------
Total current assets................................. 39,731 47,714
-------- --------
Advance under shareholders' redemption agreement............ 1,542
Unexpended bond proceeds.................................... 3,886 4,508
Intangible pension asset.................................... 3,216 2,113
Other noncurrent assets..................................... 2,483 3,825
Deferred income taxes....................................... 2,531
Property, plant and equipment, net.......................... 72,804 72,503
-------- --------
TOTAL ASSETS......................................... $126,193 $130,663
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable.................................... $ 15,114 $ 11,627
Employee compensation..................................... 5,156 4,614
Accrued expenses and other current liabilities............ 6,511 6,516
Current portion of long-term borrowings................... 2,200 7,169
-------- --------
Total current liabilities............................ 28,981 29,926
-------- --------
Pension liability........................................... 1,855 1,627
Postretirement medical benefits liability................... 19,639 16,889
Deferred income taxes....................................... 1,180
Other noncurrent liabilities................................ 1,950 1,739
-------- --------
23,444 21,435
-------- --------
Long-term borrowings -- less current portion................ 41,134 39,097
-------- --------
Total liabilities.................................... 93,559 90,458
-------- --------
Commitments and contingent liabilities (Note 13)
Redeemable Common stock, Class B nonvoting, $1 par value,
outstanding 137,112 shares (Note 11)...................... 1,800 1,297
-------- --------
Shareholders' equity
Common stock, Class A voting, $1 par value, authorized
540,000 shares, outstanding 478,255 shares............. 478 478
Common stock, Class B nonvoting, $1 par value authorized
5,400,000 shares; outstanding 3,430,623 shares......... 3,431 3,431
Retained earnings......................................... 27,376 35,730
Equity adjustment for minimum pension liability........... (451) (731)
-------- --------
30,834 38,908
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $126,193 $130,663
======== ========
The accompanying notes are an integral part of the financial statements.
F-25
114
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA)
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
---- ---- ----
Net sales................................................... $253,997 $269,260 $270,062
Cost of sales............................................... 244,129 252,671 252,275
-------- -------- --------
Gross profit................................................ 9,868 16,589 17,787
Selling, general and administrative......................... 16,395 14,949 14,438
Equipment impairment........................................ 3,000
-------- -------- --------
Operating income (loss)................................... (9,527) 1,640 3,349
Other income (expense)
Interest expense.......................................... (3,557) (3,448) (2,799)
Other income.............................................. 664 744 366
-------- -------- --------
Income (loss) before benefit (provision) for income taxes... (12,420) (1,064) 916
Benefit (provision) for income taxes........................ 4,569 264 (442)
-------- -------- --------
Income (loss) before cumulative effect of accounting
change.................................................... (7,851) (800) 474
Cumulative effect of accounting change -- post-employment
benefits, net of income tax benefit ($.12 per share)...... (510)
-------- -------- --------
Net loss.................................................... $ (7,851) $ (800) $ (36)
======== ======== ========
Net loss per share.......................................... $ (1.94) $ (.19) $ (.01)
======== ======== ========
The accompanying notes are an integral part of the financial statements.
F-26
115
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA)
EQUITY
ADJUSTMENT
CLASS A CLASS B RETAINED FOR MINIMUM
VOTING NONVOTING EARNINGS PENSION LIABILITY TOTAL
------- --------- -------- ----------------- -----
Balances at January 1, 1994................ $478 $3,427 $36,715 $ -- $40,620
Net loss for 1994........................ (36) (36)
Stock option activity.................... 4 70 74
Dividends ($.06 per share)............... (257) (257)
Accretion of redeemable common stock..... (63) (63)
Minimum pension liability adjustment..... (492) (492)
---- ------ ------- ------- -------
Balances at December 31, 1994.............. 478 3,431 36,429 (492) 39,846
Net loss for 1995........................ (800) (800)
Stock option activity.................... 213 213
Dividends ($.03 per share)............... (124) (124)
Accretion of redeemable common stock..... 12 12
Minimum pension liability adjustment..... (239) (239)
---- ------ ------- ------- -------
Balances at December 31, 1995.............. 478 3,431 35,730 (731) 38,908
Net loss for 1996........................ (7,851) (7,851)
Accretion of redeemable common stock..... (503) (503)
Minimum pension liability adjustment..... 280 280
---- ------ ------- ------- -------
Balances at December 31, 1996.............. $478 $3,431 $27,376 $(451) $30,834
==== ====== ======= ======= =======
The accompanying notes are an integral part of the financial statements.
F-27
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LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
---- ---- ----
OPERATING ACTIVITIES
Net loss.................................................... $ (7,851) $ (800) $ (36)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation.............................................. 13,746 12,486 12,045
Deferred income taxes..................................... (3,922) (1,332) (1,395)
Pension liability......................................... (2,230) 657 159
Postretirement medical benefits liability................. 2,750 2,245 2,923
Equipment impairment...................................... 3,000
Loss (Gain) on sale of equipment.......................... (23) (34) 68
Changes in operating assets and liabilities affecting cash
Trade receivables......................................... 3,745 (644) (4,397)
Inventories............................................... 4,129 (1,594) (66)
Income taxes receivable/payable........................... (1,601) 290 (1,569)
Reimbursable tooling...................................... 360 (386) (483)
Prepaid expenses and other current assets................. 635 (649) 60
Advance under shareholders' redemption agreement.......... (1,542) 500 113
Other noncurrent assets................................... 3,456 (2,948) 1,619
Trade accounts payable.................................... 3,487 (1,769) (961)
Employee compensation..................................... 542 554 72
Accrued expenses and other current liabilities............ (5) 1,241 219
Other noncurrent liabilities.............................. 220 9 850
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES............ 18,896 7,826 9,221
-------- -------- --------
INVESTING ACTIVITIES
Acquisitions of property, plant and equipment............... (16,439) (14,917) (8,696)
Proceeds from sale of equipment............................. 37 276 175
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES................ (16,402) (14,641) (8,521)
FINANCING ACTIVITIES
Proceeds from long-term borrowing arrangements.............. 25,000 8,500 27,020
Principal payments on long-term borrowing arrangements...... (23,932) (5,618) (32,831)
Net borrowings (payments) under lines of credit............. (4,000) 5,350 5,550
Proceeds from exercise of stock options..................... 213 74
Dividends................................................... (124) (257)
Redemption and retirement of redeemable common stock........ (1,581) (903)
-------- -------- --------
NET CASH USED IN FINANCING ACTIVITIES................ (2,932) 6,740 (1,347)
-------- -------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (438) (75) (647)
Cash and cash equivalents at beginning of year.............. 716 791 1,438
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 278 $ 716 $ 791
======== ======== ========
Cash paid for interest...................................... $ 3,774 $ 3,411 $ 2,732
======== ======== ========
Cash paid for income taxes.................................. $ 963 $ 291 $ 3,067
======== ======== ========
The accompanying notes are an integral part of the financial statements.
F-28
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LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1. NATURE OF OPERATIONS
Lobdell Emery Corporation (the Corporation) is a full-service supplier of
metal stampings and welded assemblies used as original equipment components
primarily by North American original equipment automotive manufacturers. The
Corporation's products are used in a wide variety of sport utility vehicles,
light and medium trucks, vans and passenger cars. The Corporation primarily
operates from five plants located in the Midwest which account for approximately
98% of the Corporation's sales for the year ended December 31, 1996. The
Corporation's hourly workforce is represented by various locals of the United
Auto Workers.
Sales to the Corporation's two primary customers as a percentage of total
sales approximated the following for the years ended December 31:
1996 1995 1994
---- ---- ----
Ford Motor Company.......................................... 43% 52% 64%
General Motors Corporation.................................. 49% 40% 29%
Accounts receivable from Ford Motor Company and General Motors Corporation
represent approximately 47% and 49%, respectively, of the December 31, 1996
accounts receivable balance.
Although the Corporation is directly affected by the economic well being of
the automotive industry and customers referred to above, management does not
believe significant credit risk exists at December 31, 1996. The Corporation
does not require collateral to reduce such risk and historically has not
experienced significant losses related to receivables from individual customers
or groups of customers in the automotive industry.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated balance sheets include the accounts of Lobdell Emery
Corporation and its wholly-owned subsidiaries, Lewis Emery Capital Corporation
(Lewis), Concept Management Corporation and subsidiaries (Concept), Laserweld
International (Laserweld) and Parallel Group International (Parallel). Concept
Management Corporation also includes the accounts of its wholly-owned
subsidiaries, Winchester Fabrication Corporation (Winchester) and Creative
Fabrication Corporation (Creative). Intercompany accounts and transactions have
been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized by the Corporation upon shipment of product to the
customer.
Financial Instruments
At December 31, 1996, the carrying amount of financial instruments such as
cash and cash equivalents, trade receivables and payables and unexpended bond
proceeds, approximated their fair values. The carrying
F-29
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LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
amount of the long-term customer receivables and borrowings at December 31,
1996, approximated their fair values based on the variable interest rates
available to the Corporation for similar arrangements.
Cash Equivalents
The Corporation considers all highly-liquid investments with maturity of
three months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is principally
determined by the last-in, first-out (LIFO) method.
Unexpended Bond Proceeds
Unexpended bond proceeds in the accompanying consolidated balance sheets
represent unexpended proceeds from the issuance of industrial development
revenue bonds by Creative as discussed in Note 6, and are invested in allowable
money market accounts and commercial paper with a maturity of 90 days or less.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of historical cost
and include expenditures for improvements which materially increase the useful
lives of existing assets. Expenditures for normal repair and maintenance are
charged to operations as incurred. For federal income tax purposes, depreciation
is computed using accelerated and straight-line methods. For financial reporting
purposes, depreciation is computed principally using the straight-line method
over the following estimated useful lives:
YEARS
-----
Land improvements........................................... 15
Buildings................................................... 30
Machinery and equipment..................................... 3-10
At December 31, 1996, the Corporation had a machine in process at a vendor
location. The aggregate cost of the machine will be $5,300, for which the
Corporation has recorded approximately $2,700 in the accompanying consolidated
balance sheet. The remaining $2,600 will be recorded by the Corporation upon
final technical approval of the machine.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," the Corporation established an impairment
reserve against certain of the assets of Laserweld in the amount of $3,000 at
December 31, 1996. The reserve represents the difference between the fair value
of the Laserweld assets, based primarily on a recent independent appraisal, and
the cost of such assets.
Environmental Compliance and Remediation
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations which do not contribute to current or future revenue
generation are expensed. Liabilities are recorded when environmental assessments
and/or remedial efforts are probable and the costs can be reasonably estimated.
Estimated costs are based upon
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LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
enacted laws and regulations, existing technology and the most probable method
of remediation. The costs determined are not discounted and exclude the effects
of inflation and other social and economic factors.
Income Taxes
Deferred taxes are provided to give recognition to the effect of expected
future tax consequences of temporary differences between the carrying amounts
for financial reporting purposes and the tax bases for income tax purposes of
assets and liabilities.
Reimbursable Tooling
Reimbursable tooling represents net costs incurred on tooling projects for
which the Corporation expects to be reimbursed by customers. Ongoing estimates
of total costs to be incurred on each tooling project are made by management and
losses, if any, are recorded when known. Generally, tooling revenue is
recognized upon acceptance of the tooling by the customer.
At December 31, 1996, approximately $2,800 of reimbursable tooling was in
process at various vendor locations. These amounts, which have not been recorded
in the accompanying consolidated balance sheet, will be recorded and paid upon
the Corporation's receipt of payment from the owners of the tooling.
Net Loss Per Share
Net loss per share is determined by dividing net loss by the weighted
average number of common shares outstanding during the period.
Reclassifications
Certain amounts from the prior year have been reclassified to conform with
the current year presentation.
NOTE 3. INVENTORIES
Inventories are comprised of the following at December 31:
1996 1995
---- ----
Raw materials............................................... $ 3,851 $ 3,861
Finished goods and work-in-process.......................... 5,278 10,177
------- -------
9,129 14,038
LIFO reserve................................................ (3,046) (3,826)
------- -------
$ 6,083 $10,212
======= =======
The Corporation does not separately identify finished goods from
work-in-process.
During 1996, inventory quantities were reduced. This reduction resulted in
a liquidation of LIFO inventory quantities carried at lower costs prevailing in
prior years as compared with the cost of 1996 purchases, the effect of which
increased net income by approximately $300.
F-31
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LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following at December
31:
1996 1995
---- ----
Land and land improvements............................. $ 11,130 $ 10,760
Buildings.............................................. 33,515 32,801
Machinery and equipment, net of impairment reserve of
$3,000 in 1996....................................... 137,914 127,389
Construction-in-process................................ 6,495 5,216
--------- ---------
189,054 176,166
Less -- accumulated depreciation....................... (116,250) (103,663)
--------- ---------
$ 72,804 $ 72,503
========= =========
NOTE 5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are comprised of the
following at December 31:
1996 1995
---- ----
Accrued workers' compensation............................... $2,438 $2,438
Accrued property taxes...................................... 1,950 1,622
Accrued medical benefits.................................... 1,816 1,615
Other....................................................... 307 841
------ ------
$6,511 $6,516
====== ======
NOTE 6. BORROWING ARRANGEMENTS
Borrowings consist of the following at December 31:
1996 1995
---- ----
BANK SYNDICATE -- TERM LOAN, LOBDELL EMERY CORPORATION
Interest at variable spread over prime (8.25% at December
31, 1996). Quarterly principal payments of $893 plus
interest, matures September 12, 1999...................... $24,107 $21,230
BANK -- TERM LOAN, LEWIS
Interest at .625% over 90-day LIBOR (6.19% at December 31,
1996). Quarterly principal payments of approximately $400,
matures October 1, 1998................................... 3,227 4,936
BANK SYNDICATE -- REVOLVING CREDIT LINE, LOBDELL EMERY
CORPORATION
Interest at variable spread over prime (8.25% at December
31, 1996)................................................. 7,600 11,600
INDUSTRIAL DEVELOPMENT REVENUE BONDS -- CREATIVE
$8,500 issued September 27, 1995, floating rate interest
(4.35% at December 31, 1996). Quarterly principal payments
based on graduated maturity schedule. Backed by NBD Bank
letter of credit.......................................... 8,400 8,500
------- -------
Total.................................................. 43,334 46,266
Less -- current portion of long-term borrowings............. (2,200) (7,169)
------- -------
Long-term borrowings -- less current portion................ $41,134 $39,097
======= =======
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LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 6. BORROWING ARRANGEMENTS -- (CONTINUED)
Subsequent to December 31, 1996, the Bank syndicate term loan and revolving
credit line were paid in full, with accrued interest, in connection with the
merger described in Note 15. These borrowings were replaced with a $54,000 term
loan, $38,000 revolving line of credit and $3,000 swing line of credit, each
expiring on January 10, 2002. Accordingly, these amounts are classified as
long-term borrowings at December 31, 1996. The term loan bears interest at a
variable spread over 90-day LIBOR, and the revolving and swing lines of credit
bear interest at a variable spread over the prime rate. The Corporation also
entered into an $18,000 capital expenditure line of credit that expires on
January 10, 2002. The agreements contain various financial and other covenants.
Borrowings are secured by substantially all of the assets of the Corporation.
The proceeds of the Lewis term debt were used to finance customer tooling.
The debt is collateralized by a customer purchase order which allows for
recovery of the term-debt principal and interest, administrative cost and a
predetermined markup.
The proceeds of the industrial development revenue bonds were used to
finance the real and personal property of Creative. These bonds are backed by an
NBD Bank letter of credit, which carries a rate of .8% and is collateralized by
substantially all assets of Creative. The letter of credit reimbursement
agreement includes covenants requiring minimum tangible capital, debt service
coverage and limitations on other indebtedness.
NOTE 7. STOCK OPTION PLAN
The Corporation adopted a stock option plan in 1990 which provides for the
granting of discretionary and nondiscretionary options, alternative stock
appreciation rights, cash payment rights, incentive stock options, or a
combination thereof. Each option granted under the plan is for a unit consisting
of one share of Class A and ten shares of Class B common stock. During the years
ended December 31, 1995 and 1994 the Corporation recorded compensation expense
of $213 and $70, respectively. No options were granted or exercised during the
year ended December 31, 1996. Subsequent to December 31, 1996 and in connection
with the merger described in Note 15, all of the outstanding stock options were
canceled. The costs incurred by the Corporation in connection with the
cancellation of the outstanding stock options were reimbursed by L-E
Acquisition, Inc. at close. In accordance with Emerging Issues Task Force Issue
No. 85-45, "Business Combinations: Settlement of Stock Options and Awards," the
Corporation has treated the reimbursement as a credit to compensation expense
recognized in connection with the cancellation of the aforementioned stock
options. The disclosures required under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," have been omitted
as all outstanding stock options were canceled subsequent to December 31, 1996.
Because the acquiring company (see Note 15) has no stock option plan, the
Corporation's management does not believe such disclosure to be relevant to the
users of the consolidated financial statements.
F-33
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LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 8. INCOME TAXES
The Corporation's benefit for income taxes consists of the following for
the years ended December 31:
1996 1995 1994
---- ---- ----
Current
Federal....................................... $ (647) $ 399 $ 1,425
State......................................... 371 375
------- ------- -------
(647) 770 1,800
------- ------- -------
Deferred
Federal....................................... (3,405) (869) (1,206)
State......................................... (517) (165) (152)
------- ------- -------
(3,922) (1,034) (1,358)
------- ------- -------
$(4,569) $ (264) $ 442
======= ======= =======
A reconciliation between the Corporation's income tax provision (benefit)
and the amount computed by applying the statutory income tax rate to income
before income taxes is as follows for the years ended December 31:
1996 1995 1994
---- ---- ----
Statutory rate...................................... $(4,223) $(362) $311
State taxes, net of federal benefit................. (517) 136 147
Nondeductible items................................. 212 104 76
Other............................................... (41) (142) (92)
------- ----- ----
Provision (benefit) for income taxes................ $(4,569) $(264) $442
======= ===== ====
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LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 8. INCOME TAXES -- (CONTINUED)
Significant components of the Corporation's deferred tax assets and
(liabilities) are as follows at December 31:
1996 1995
---- ----
Deferred tax liabilities
Tax depreciation in excess of book........................ $(8,312) $(8,619)
Prepaid pension asset..................................... (427) (574)
------- -------
Gross deferred tax liabilities.............................. (8,739) (9,193)
------- -------
Deferred tax assets
Postretirement medical benefits........................... 7,463 6,418
Equipment impairment reserve.............................. 1,140
Workers' compensation..................................... 926 927
Medical benefits accrual.................................. 687 611
Allowance for bad debts................................... 477 190
Environmental reserves.................................... 334 334
Postemployment benefits................................... 323 323
AMT credit carryforward................................... 1,871 1,708
Other..................................................... 1,330 540
------- -------
Gross deferred tax assets................................... 14,551 11,051
------- -------
Valuation allowance......................................... (200)
------- -------
Net deferred tax asset...................................... $ 5,612 $ 1,858
======= =======
A valuation allowance is provided on the tax benefits otherwise associated
with certain tax attributes unless it is considered more likely than not that
the benefit will be realized.
The Corporation has net operating loss carryforwards for state income tax
purposes with potential future tax benefits of approximately $150 at December
31, 1996, which expire during the years 2010 and 2011.
The Corporation has Tennessee Jobs Tax Credit carryforwards of
approximately $200 at December 31, 1996, which expire during the years 2010 and
2011.
NOTE 9. BENEFIT PLANS
The Corporation sponsors six noncontributory-defined benefit pension plans
covering substantially all employees meeting the age and length of service
requirements as specified in the plans. The plan covering salaried employees
provides pension benefits that are based on a percentage of the employee's
average monthly compensation during the five highest consecutive years out of
their last ten years, and their years of credited service up to a maximum of 30
years. The Corporation's hourly pension plans do not provide for increases in
future compensation levels. The Corporation's funding policy for this plan is to
make contributions in amounts sufficient to annually fund the plan's current
service cost and the initial past service cost, plus interest, over a period of
30 years. Plans covering hourly employees generally provide benefits of stated
amounts based on their unique labor agreements for each year of service. The
Corporation's funding policy for these plans is to make at least the minimum
annual contributions required by applicable regulations.
F-35
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LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 9. BENEFIT PLANS -- (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized on the Corporation's balance sheet at December 31:
1996 1995
------------------------- -------------------------
OVERFUNDED UNDERFUNDED OVERFUNDED UNDERFUNDED
PLANS PLANS PLANS PLANS
---------- ----------- ---------- -----------
Actuarial present value of benefit obligation:
Vested benefits................................ $ 14,784 $ 21,270 $ 13,718 $ 18,926
Nonvested benefits............................. 1,174 1,468 1,143 1,597
-------- -------- -------- --------
15,958 22,738 14,861 20,523
Effect of projected future compensation levels... 3,278 2,866
-------- -------- -------- --------
Projected benefit obligation for service
rendered....................................... 19,236 22,738 17,727 20,523
Plan assets at fair value (primarily U.S.
government securities, bonds and notes and
mutual funds).................................. (18,857) (19,656) (17,092) (17,477)
-------- -------- -------- --------
Plan assets less than projected benefit
obligation..................................... 379 3,082 635 3,046
Unrecognized net loss............................ (2,080) (865) (2,612) (1,353)
Unrecognized prior service cost.................. 174 (2,757) 227 (1,572)
Unrecognized net obligation being recognized over
15-20 years.................................... 300 (346) 350 (426)
Adjustment required to recognize minimum
liability...................................... 3,968 3,332
-------- -------- -------- --------
(Prepaid) accrued pension cost................... $ (1,227) $ 3,082 $ (1,400) $ 3,027
======== ======== ======== ========
The minimum pension liability in excess of the allowable intangible asset
of $751 and $1,218 at December 31, 1996 and 1995, respectively, has been
recorded as a separate component of equity, net of tax.
Net periodic pension cost included the following components for the year
ended December 31:
1996 1995 1994
---- ---- ----
Service cost.................................... $ 1,100 $ 857 $ 1,142
Interest cost................................... 2,800 2,641 2,418
Actual return on plan assets.................... (4,322) (5,867) (232)
Net amortization and deferral................... 1,560 3,606 (1,993)
------- ------- -------
Net periodic pension cost....................... $ 1,138 $ 1,237 $ 1,335
======= ======= =======
Actuarial assumptions used in determining the projected benefit obligation
are as follows:
1996 1995 1994
---- ---- ----
Discount rate............................................. 7.5% 7.5% 8.5%
Rate of increase in future compensation................... 4.5% 4.5% 4.5%
Expected long-term rate of return on assets............... 9.0% 9.0% 8.0%
The Corporation sponsors a Supplemental Employee Retirement Plan (SERP)
which covers three key officers of the Corporation. At December 31, 1996, the
Corporation has accrued a liability of $217 related to the SERP.
The Corporation sponsors five defined contribution 401(k) plans. The
Salaried Employees' Retirement Savings Plan covers all salaried employees of the
Corporation and Winchester. The Alma Hourly Employees'
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125
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 9. BENEFIT PLANS -- (CONTINUED)
Retirement Savings Plan, the Argos Hourly Employees' Retirement Savings Plan,
the Creative Fabrication Corporation and the Greencastle Hourly Employees' Plan
cover all eligible hourly employees at the respective locations. The Corporation
generally contributes 25% of the first 6% of the base compensation that a
participant contributes to the plans.
NOTE 10. POSTRETIREMENT MEDICAL BENEFITS
In addition to the Corporation's defined benefit pension plans, the
Corporation sponsors unfunded defined benefit medical plans that provide
postretirement medical benefits to certain full-time employees meeting the age,
length of service and contractual requirements as specified in the plans. The
plan covering salaried employees is a contributory plan providing medical
benefits to those hired before July 1, 1993. The percentage of cost paid by the
retiree currently ranges from 10% for 30 or more years of service at retirement
to 55% for 15 years of service at retirement, with Corporation contributions
commencing upon attainment of age 62. Those retiring with less than 15 years of
service and those hired after June 30, 1993 may participate in the plan at their
own cost. The plan is currently noncontributory for those employees who retired
prior to July 1, 1993. The plans covering hourly employees provide medical
benefit plan options that are similar to those offered to active hourly
employees, with Corporation contributions limited either to that available under
traditional coverage for Alma hourly retirees or to 87% of the total applicable
premium for Greencastle retirees.
The following table presents the plans' funded status reconciled with
amounts recognized in the Corporation's balance sheets at December 31:
1996 1995
---- ----
Accumulated postretirement benefit obligation
Retirees............................................... $ 14,420 $ 13,132
Full eligible active plan participants................. 4,767 4,408
Other active plan participants......................... 14,613 12,931
-------- --------
Total unfunded obligation......................... 33,800 30,471
Unrecognized loss........................................ (2,618) (1,481)
Unrecognized transition obligation....................... (11,543) (12,101)
-------- --------
Postretirement medical benefits liability................ $ 19,639 $ 16,889
======== ========
Net periodic postretirement benefit cost included the following components
for the year ended December 31:
1996 1995 1994
---- ---- ----
Service cost.......................................... $ 947 $ 785 $1,088
Interest cost......................................... 2,216 2,010 2,238
Amortization of transition obligation prior losses.... 722 643 997
------ ------ ------
Net periodic postretirement benefit cost.............. $3,885 $3,438 $4,323
====== ====== ======
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% in 1996 and 1995. The weighted
average annual assumed rate of increase in the per capita cost of covered
benefits (i.e., healthcare cost trend rate) is 9.2% in 1997 trending to 6.5% in
2008 and thereafter for retirees less than 65 years of age. For retirees 65
years of age and over, the rate is 8.9% in 1997 trending to 6.5% in 2008 and
thereafter. The healthcare cost trend rate assumption has a significant effect
on the amounts reported. For example, increasing the assumed healthcare cost
trend rates by one percentage
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126
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 10. POSTRETIREMENT MEDICAL BENEFITS -- (CONTINUED)
point in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1996 and net periodic postretirement benefit cost
for the year then ended by approximately $4,861 and $496, respectively.
NOTE 11. SHAREHOLDERS' REDEMPTION AGREEMENT AND REDEEMABLE COMMON STOCK
Due to the death of a major shareholder, the Corporation entered into an
agreement in December, 1988, providing for the redemption from the estate of any
class of common stock. The Corporation shall purchase for cash certain shares of
common stock as required each year, for the payment by the estate of federal and
state taxes and other miscellaneous expenses allowed by Internal Revenue Code
Section 6166. The redemption price is based upon the fair value, as previously
determined by an independent appraisal at the date of death, adjusted for
subsequent increases or decreases in book value as defined in the agreement.
Subsequent to December 31, 1996 and in connection with the merger as described
in Note 15, a portion of the common stock owned by the estate will be redeemed
to cover payment of remaining taxes and administrative expenses. Prior to the
merger, $1,542 was advanced to the estate to effectuate a release of an Internal
Revenue Service lien. Common shares that are redeemable under that terms of the
agreement have been recorded in the consolidated balance sheets as Redeemable
Common Stock. During the years ended December 31, 1995 and 1994, the Company
redeemed 165,555 shares and 96,597 shares, respectively, at a per share price of
$9.55 and $9.34, respectively. The redeemable common stock has been accreted to
its redemption value in each of the accompanying consolidated balance sheets.
NOTE 12. LEWIS EMERY CAPITAL CORPORATION
Lewis was established in order to facilitate the financing of a tooling
project for Ford Motor Company (Ford). In 1993, Lewis signed a contract to
finance $8,500 of tooling. The transaction was financed with proceeds from the
term loan described in Note 6. The receivable from Ford is due in 20 quarterly
installments through October 1998.
NOTE 13. COMMITMENTS AND CONTINGENCIES
Operating Leases
As of December 31, 1996, the Corporation had long-term operating leases
covering certain machinery and equipment. The minimum rental commitments under
noncancellable operating leases with lease terms in excess of one year are as
follows as of December 31, 1996:
1997........................................................ $ 4,690
1998........................................................ 3,241
1999........................................................ 3,367
2000........................................................ 1,178
2001........................................................ 3,355
-------
$15,831
=======
Environmental Matters
The Corporation is subject to federal, state and local laws and regulations
which govern environmental matters. These laws regulate the discharge of
materials into the environment and may require the Corporation to remove or
mitigate the environmental effects of the disposal or release of petroleum or
chemical substances. The Corporation has identified several environmental
matters resulting from prior operations. Due to the relatively early stage of
investigation of certain of these identified matters as well as potential
indemnification
F-38
127
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 13. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
by other potentially responsible parties, management is unable to reasonably
estimate the ultimate cost of remediating certain of these identified
environmental matters. At December 31, 1996 and 1995, the Corporation has a
liability of approximately $880 recorded for estimated costs of known
environmental matters.
General
The Corporation is subject to various claims, lawsuits and administrative
proceedings related to matters arising out of the normal course of business. In
the opinion of management, after reviewing the information which is currently
available with respect to such matters and consulting with legal counsel, any
liability which may ultimately be incurred with respect to these matters will
not materially affect the financial position of the Corporation.
NOTE 14. RELATED-PARTY TRANSACTION
During 1996, the Corporation paid sales commissions, based upon qualified
foreign sales to Grace Emery Sales Corporation, a Domestic International Sales
Corporation (DISC) owned by the shareholders of the Corporation. Commissions
payable to the DISC are subject to certain restrictions. Commissions were $369,
$521 and $772 in 1996, 1995 and 1994, respectively.
NOTE 15. SUBSEQUENT EVENT
On January 10, 1997, pursuant to an Agreement and Plan of Merger among
Lobdell Emery Corporation, certain shareholders of Lobdell Emery Corporation,
BMG-MI, Inc. and L-E Acquisition, Inc. as amended, certain Lobdell Emery
Corporation shareholders and option holders had their respective shares and
options redeemed for cash of approximately $8,500 and all outstanding shares of
common stock of Lobdell Emery Corporation (Oldco) were exchanged for shares of
preferred stock of L-E Acquisition, Inc. with a face value of approximately
$40,800. In addition, approximately $3,500 of expenses incurred by the
Corporation were reimbursed by L-E Acquisition, Inc. Subsequent to the exchange
of Oldco's common stock for preferred stock, L-E Acquisition, Inc. was merged
with and into Lobdell Emery Corporation (Newco).
NOTE 16. RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS
The Corporation's management has restated the consolidated financial
statements for periods prior to December 31, 1996. The consolidated financial
statements have been restated to correct the misstatement of certain assets and
liabilities including accounts receivable, accrued employee benefit related
costs and accrued environmental costs, net of related tax benefits. The effect
of the restatement was to decrease retained earnings at January 1, 1994 by
$1,987, decrease net loss by $36 ($.01 per share) for the year ended December
31, 1995, and increase net loss by $647 ($.15 per share) for the year ended
December 31, 1994.
F-39
128
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information................... 2
Summary................................. 3
Risk Factors............................ 14
Use of Proceeds......................... 20
Capitalization.......................... 21
Pro Forma Combined Financial Data....... 22
Selected Consolidated Historical
Financial Data........................ 27
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 28
The Exchange Offer...................... 32
Business................................ 38
Management.............................. 49
Principal Shareholders.................. 53
Certain Transactions.................... 54
Description of Certain Indebtedness and
Preferred Stock....................... 55
Description of the Notes................ 58
Certain Federal Income Tax
Considerations........................ 84
Plan of Distribution.................... 85
Legal Matters........................... 85
Experts................................. 85
Index to Consolidated Financial
Statements............................ F-1
======================================================
======================================================
$125,000,000
OXFORD AUTOMOTIVE, INC.
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
[OXFORD AUTOMOTIVE, INC. LOGO]
OFFER TO EXCHANGE
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
------------------------
PROSPECTUS
------------------------
DATED , 1997
======================================================
129
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 561 through 571 of the Michigan Business Corporation Act (the
"MBCA") set forth the conditions and limitations governing the indemnification
of officers, directors and other persons by Michigan corporations.
In general, the MBCA allows Michigan corporations to indemnify a person who
was or is a party or is threatened to be made a party to a threatened, pending
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal, other than an
action by or in the right of the corporation, by reason of the fact that such
person is or was a director, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee, or agent of another enterprise, against expenses, including
attorneys' fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred in connection therewith, if such person acted
in good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation or its shareholders, and with respect to a
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
The MBCA also allows Michigan corporations to indemnify such a person who
was or is a party or is threatened to be made a party to a threatened, pending
or completed action or suit by or in the right of the corporation against
expenses, including actual and reasonable attorneys' fees, and amounts paid in
settlement actually and reasonably incurred by the person in connection with the
action or suit, if such person acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation or its
shareholders. However, indemnification shall not be made for a claim, issue or
matter in which the person is found liable to the corporation unless and only to
the extent that a court of competent jurisdiction has determined that, despite
the adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnification for the expenses
which the court considers proper.
The Bylaws of Oxford Automotive require Oxford Automotive to indemnify
directors and officers to the extent permitted by the MBCA.
Oxford Automotive has entered into an agreement with each of its directors
under which Oxford Automotive agrees to indemnify the director against certain
liabilities and expenses incurred by the director by reason of serving as a
director of Oxford Automotive or in certain other capacities at the request of
Oxford Automotive. In general, under the agreements, Oxford Automotive agrees to
indemnify the director to the extent permitted by the MBCA subject to the
following: (a) Oxford Automotive agrees to reimburse the director for expenses
incurred prior to the final disposition of the matter or proceeding, subject to
certain limitations; and (b) the director may file a suit against Oxford
Automotive if Oxford Automotive refuses to indemnify the director, and the court
is authorized to determine whether the director is entitled to be indemnified
whether or not a determination in such respect has or has not been made by the
Board of Directors, independent legal counsel, or the shareholders of Oxford
Automotive.
The MBCA permits a corporation to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of the
corporation against liabilities arising out of such person's positions with the
corporation, whether or not the corporation would have the power to indemnify
such person against liability under the MBCA.
Oxford Automotive carries a directors and officers liability insurance
policy which insures directors and officers of Oxford Automotive against certain
liability by reason of certain acts or omissions in connection with their duties
for Oxford Automotive and which insures Oxford Automotive against certain
amounts for which it is legally obligated to pay or for which it has agreed or
is required to indemnify the directors or officers. During each policy year, the
aggregate limit of liability under the policy is $5,000,000, and the insurer is
generally obligated to pay for any loss experienced by a director or officer and
for any loss in excess of $50,000 experienced by Oxford Automotive. The
insurance policy is in effect until October 25, 1997.
II-1
130
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. A list of exhibits included as part of this Registration
Statement is set forth in the Exhibit Index which immediately precedes
such exhibits and is incorporated herein by reference.
(b) Financial Statement Schedules.
II -- Valuation and Qualifying Accounts.
ITEM 22. UNDERTAKINGS.
Each undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions described under Item 20 or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a co-
registrant of expenses incurred or paid by a director, officer or controlling
person of such co-registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, such co-registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Each undersigned registrant hereby undertakes:
To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
II-2
131
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
To supply by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein, that was not the
subject of and included in the registration statement when it became effective.
II-3
132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certified that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Bloomfield Hills and State of Michigan on August 4, 1997.
OXFORD AUTOMOTIVE, INC.
By: /s/ STEVEN M. ABELMAN
------------------------------------
Steven M. Abelman
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
SIGNATURE TITLE
--------- -----
/s/ SELWYN ISAKOW Chairman of the Board and Director
- ---------------------------------------------
Selwyn Isakow
/s/ REX E. SCHLAYBAUGH, JR. Vice Chairman of the Board and Director
- ---------------------------------------------
Rex E. Schlaybaugh, Jr.
/s/ STEVEN M. ABELMAN President, Chief Executive Officer and Director
- ---------------------------------------------
Steven M. Abelman
/s/ DONALD C. CAMPION Senior Vice President-Chief Financial Officer
- --------------------------------------------- (Principal Accounting and Financial Officer)
Donald C. Campion
/s/ MANFRED J. WALT Director
- ---------------------------------------------
Manfred J. Walt
II-4
133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certified that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Bloomfield Hills and State of Michigan on August 4, 1997.
LOBDELL EMERY CORPORATION
By: /s/ STEVEN M. ABELMAN
------------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
SIGNATURE TITLE
--------- -----
/s/ STEVEN M. ABELMAN President (Principal Executive Officer) and
- --------------------------------------------- Director
Steven M. Abelman
/s/ DONALD C. CAMPION Vice President-Chief Financial Officer, Treasurer
- --------------------------------------------- (Principal Accounting and Financial Officer) and
Donald C. Campion Director
/s/ JOHN H. FERGUSON Director
- ---------------------------------------------
John H. Ferguson
Director
- ---------------------------------------------
D. Kennedy Fesenmyer
II-5
134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certified that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Bloomfield Hills and State of Michigan on August 4, 1997.
BMG NORTH AMERICA LIMITED
By: /s/ ROBERT LACOURCIERE
------------------------------------
Robert LaCourciere, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
SIGNATURE TITLE
--------- -----
/s/ ROBERT LACOURCIERE President (Principal Executive Officer)
- ---------------------------------------------
Robert LaCourciere
/s/ JOHN H. FERGUSON Vice President, Chief Financial Officer, Treasurer
- --------------------------------------------- and Secretary (Principal Accounting and Financial
John H. Ferguson Officer)
/s/ LAWRENCE C. CORNWALL Director
- ---------------------------------------------
Lawrence C. Cornwall
/s/ SELWYN ISAKOW Director
- ---------------------------------------------
Selwyn Isakow
Director
- ---------------------------------------------
James W. Robinson
/s/ MANFRED J. WALT Director
- ---------------------------------------------
Manfred J. Walt
Director
- ---------------------------------------------
Donald Holton
II-6
135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certified that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Bloomfield Hills and State of Michigan on August 4, 1997.
BMG HOLDINGS, INC.
By: /s/ SELWYN ISAKOW
------------------------------------
Selwyn Isakow, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
SIGNATURE TITLE
--------- -----
/s/ SELWYN ISAKOW President (Principal Executive Officer) and
- --------------------------------------------- Director
Selwyn Isakow
/s/ JOHN H. FERGUSON Treasurer (Principal Accounting and Financial
- --------------------------------------------- Officer)
John H. Ferguson
Director
- ---------------------------------------------
James W. Robinson
/s/ MANFRED J. WALT Director
- ---------------------------------------------
Manfred J. Walt
II-7
136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certified that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Bloomfield Hills and State of Michigan on August 4, 1997.
WINCHESTER FABRICATION CORPORATION
By: /s/ STEVEN M. ABELMAN
------------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
SIGNATURE TITLE
--------- -----
/s/ STEVEN M. ABELMAN President (Principal Executive Officer) and
- --------------------------------------------- Director
Steven M. Abelman
/s/ DONALD C. CAMPION Vice President-Chief Financial Officer, Treasurer
- --------------------------------------------- (Principal Accounting and Financial Officer) and
Donald C. Campion Director
/s/ JOHN H. FERGUSON Director
- ---------------------------------------------
John H. Ferguson
II-8
137
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certified that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Bloomfield Hills and State of Michigan on August 4, 1997.
CREATIVE FABRICATION CORPORATION
By: /s/ STEVEN M. ABELMAN
------------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
SIGNATURE TITLE
--------- -----
/s/ STEVEN M. ABELMAN President (Principal Executive Officer) and
- --------------------------------------------- Director
Steven M. Abelman
/s/ DONALD C. CAMPION Vice President-Chief Financial Officer, Treasurer
- --------------------------------------------- (Principal Accounting and Financial Officer) and
Donald C. Campion Director
/s/ JOHN H. FERGUSON Director
- ---------------------------------------------
John H. Ferguson
II-9
138
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certified that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Bloomfield Hills and State of Michigan on August 4, 1997.
PARALLEL GROUP INTERNATIONAL, INC.
By: /s/ STEVEN M. ABELMAN
------------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
SIGNATURE TITLE
--------- -----
/s/ STEVEN M. ABELMAN President (Principal Executive Officer) and
- --------------------------------------------- Director
Steven M. Abelman
/s/ DONALD C. CAMPION Vice President-Chief Financial Officer, Treasurer
- --------------------------------------------- (Principal Accounting and Financial Officer) and
Donald C. Campion Director
/s/ JOHN H. FERGUSON Director
- ---------------------------------------------
John H. Ferguson
II-10
139
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certified that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Bloomfield Hills and State of Michigan on August 4, 1997.
LASERWELD INTERNATIONAL, L.L.C.
By: Lobdell Emery Corporation, its
sole member
By: /s/ STEVEN M. ABELMAN
------------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
SIGNATURE TITLE
--------- -----
/s/ STEVEN M. ABELMAN President (Principal Executive Officer) and
- --------------------------------------------- Director of Lobdell Emery Corporation
Steven M. Abelman
/s/ DONALD C. CAMPION Vice President-Chief Financial Officer, Treasurer
- --------------------------------------------- (Principal Accounting and Financial Officer) and
Donald C. Campion Director of Lobdell
/s/ JOHN H. FERGUSON Director of Lobdell Emery Corporation
- ---------------------------------------------
John H. Ferguson
II-11
140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certified that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Bloomfield Hills and State of Michigan on August 4, 1997.
CONCEPT MANAGEMENT CORPORATION
By: /s/ STEVEN M. ABELMAN
------------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
SIGNATURE TITLE
--------- -----
/s/ STEVEN M. ABELMAN President (Principal Executive Officer) and
- --------------------------------------------- Director
Steven M. Abelman
/s/ DONALD C. CAMPION Vice President-Chief Financial Officer, Treasurer
- --------------------------------------------- (Principal Accounting and Financial Officer) and
Donald C. Campion Director
/s/ JOHN H. FERGUSON Director
- ---------------------------------------------
John H. Ferguson
II-12
141
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certified that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Bloomfield Hills and State of Michigan on August 4, 1997.
LEWIS EMERY CAPITAL CORPORATION
By: /s/ STEVEN M. ABELMAN
------------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
SIGNATURE TITLE
--------- -----
/s/ STEVEN M. ABELMAN President (Principal Executive Officer) and
- --------------------------------------------- Director
Steven M. Abelman
/s/ DONALD C. CAMPION Vice President-Chief Financial Officer, Treasurer
- --------------------------------------------- (Principal Accounting and Financial Officer) and
Donald C. Campion Director
/s/ JOHN H. FERGUSON Director
- ---------------------------------------------
John H. Ferguson
II-13
142
OXFORD AUTOMOTIVE, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLAR AMOUNTS IN THOUSANDS)
PERIOD PERIOD
FROM FROM
OCTOBER 28, APRIL 1,
1995 1995
YEAR ENDED THROUGH THROUGH YEAR ENDED
MARCH 31, MARCH 31, OCTOBER 27, MARCH 31,
1997 1996 1995 1995
---------- ----------- ----------- ----------
Balance, beginning of period...................... 39 31 25 22
Additions
Acquisition of Lobdell Emery Corporation........ 1,254 -- -- --
Provision for additional allowance.............. 12 8 5 12
Deductions
Currency translation adjustments................ -- -- 1 --
Doubtful accounts (charged) recovered........... (33) -- -- (9)
----- -- -- --
Balance, end of period............................ 1,272 39 31 25
===== == == ==
S-1
143
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Agreement and Plan of Merger by and among Howell Industries,
Inc., the Company and HI Acquisition, Inc., dated May 21,
1997. The Agreement and Plan of Merger does not contain the
Disclosure Schedules which include routine background
information relating to the parties. The registrant will
furnish supplementally a copy of the omitted material to the
Commission upon request.
2.2 Shareholders Agreement by and among the Company, HI
Acquisition, Inc., and NBD Bank and Morton Schiff,
co-trustees of the Herbert H. Freedland Marital Trusts,
dated May 21, 1997.
3.1 Articles of Incorporation of the Company
3.2 Articles of Incorporation of Lobdell Emery Corporation
3.3 Articles of Incorporation of BMG North America Limited
3.4 Articles of Incorporation of BMG Holdings, Inc.
3.5 Articles of Incorporation of Winchester Fabrication
Corporation
3.6 Articles of Incorporation of Creative Fabrication
Corporation
3.7 Articles of Incorporation of Parallel Group International,
Inc.
3.8 Articles of Organization of Laserweld International, L.L.C.
3.9 Articles of Incorporation of Concept Management Corporation
3.10 Articles of Incorporation of Lewis Emery Capital Corporation
3.11 Bylaws of the Company
3.12 Bylaws of Lobdell Emery Corporation
3.13 Bylaws of BMG North America Limited
3.14 Bylaws of BMG Holdings, Inc.
3.15 Bylaws of Winchester Fabrication Corporation
3.16 Bylaws of Creative Fabrication Corporation
3.17 Bylaws of Parallel Group International, Inc.
3.18 Bylaws of Concept Management Corporation
3.19 Bylaws of Lewis Emery Capital Corporation
4.1 Indenture, dated as of June 15, 1997, by and among the
Company, the Subsidiary Guarantors and First National Trust
Association, as Trustee (including form of the 10 1/8%
Senior Subordinated Notes Due 2007 and form of the Guaranty)
4.2 Credit Agreement between the Company and NBD Bank, as agent,
dated June 24, 1997
4.3 Security Agreement between the Company and NBD Bank, as
agent, dated June 24, 1997
4.4 Security Agreement between 829500 Ontario Limited and First Chicago
NBD Bank, Canada, dated June 24, 1997
4.5 Security Agreement between 976459 Ontario Limited and First Chicago
NBD Bank, Canada, dated June 24, 1997
4.6 Security Agreement between BMG Holdings, Inc. and First Chicago
NBD Bank, Canada, dated June 24, 1997
4.7 Security Agreement between BMG North America Limited and First Chicago
NBD Bank, Canada, dated June 24, 1997
4.8 Security Agreement among Lobdell Emery and its subsidiaries
and NBD Bank, as agent, dated June 24, 1997
144
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.9 Guarantee Agreement among 829500 Ontario Limited, 976459
Ontario Limited, BMG Holdings, Inc. and NBD Bank, as agent,
dated June 24, 1997
4.10 Guarantee Agreement between BMG North America Limited and
NBD Bank, as agent, dated June 24, 1997
4.11 Guarantee Agreement among Lobdell Emery and its subsidiaries
and NBD Bank, as agent, dated June 24, 1997
4.12 Pledge Agreement and Irrevocable Proxy between the Company
and NBD Bank, as agent, dated June 24, 1997
4.13 Pledge Agreement and Irrevocable Proxy between Lobdell Emery
and NBD Bank, as agent, dated June 24, 1997
4.14 Pledge Agreement and Irrevocable Proxy between Concept
Management Corporation and NBD Bank, as agent, dated June
24, 1997
4.15 Subrogation and Contribution Agreement among the Company and
the Guarantors, dated June 24, 1997
4.16 Registration Agreement dated June 24, 1997 by and among the
Company, the Subsidiary Guarantors and the Initial
Purchasers
5.1 Opinion of Dykema Gossett PLLC
5.2 Opinion of Fasken Campbell Godfrey
10.1 Form of RPI Note
10.2 Form of Director Indemnification Agreement
10.3 Employment and Noncompetition Agreement between the Company
and Steven M. Abelman
10.4 Employment and Noncompetition Agreement between the Company
and Donald C. Campion
10.5 Employment Agreement between BMG North America and Larry C. Cornwall
10.6 Shareholders Agreement among certain of the Shareholders of
the Company and BMG-MI, Inc. (now known as Oxford
Automotive, Inc.), dated October 23, 1995
10.7 Shareholders Agreement among certain of the Shareholders of
the Company and the Company dated January 10, 1997
10.8 Management and Consulting Agreement between the Company and
The Oxford Investment Group, Inc., dated June 24, 1997
10.9 Settlement Agreement and Mutual Release, dated July 15,
1997, regarding Lobdell Preferred Shareholders
10.10 Agreement and Plan of Merger dated as of November 14, 1996,
by and between Lobdell Emery Corporation , BMG-MI, Inc. (now
known as "Oxford Automotive, Inc."), L-E Acquisition, Inc.,
the Shareholders of Lobdell Emery Corporation, and D.
Kennedy Fesenmyer, as Shareholders' Agent. The Agreement and
Plan of Merger does not contain the Disclosure Schedules
which include routine background information relating to the
parties. The registrant will furnish supplementally a copy
of the omitted material to the Commission upon request.
10.11 Amendment to Agreement and Plan of Merger, dated December
27, 1996 by and among Lobdell Emery Corporation BMG-MI, Inc.
(now known as "Oxford Automotive, Inc."), L-E Acquisition,
Inc., D. Kennedy Fesenmyer, as Shareholders' Agent, and
Lobdell Holdings, Inc.
10.12 Agreement and Plan of Merger, dated as of January 8, 1997
among Lobdell Holdings, Inc. and BMG-MI, Inc.(now known as
"Oxford Automotive, Inc."). The Agreement and Plan of Merger
does not contain the Disclosure Schedules which include
routine background information relating to the parties. The
registrant will furnish supplementally a copy of the omitted
material to the Commission upon request.
145
EXHIBIT NO. DESCRIPTION
- ----------- -----------
12 Statement regarding computation of ratios
21 Subsidiaries of the Registrant
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Price Waterhouse LLP
23.3 Consent of Deloitte & Touche
23.4 Consent of Dykema Gossett PLLC (included in Exhibit 5.1
hereof)
23.5 Consent of Fasken Campbell Godfrey (included in Exhibit 5.2
hereof)
24 Powers of Attorney (included on signature pages to this
Registration Statement)
25 Form T-1 Statement of Eligibility and Qualification on Form
T-1 of First Trust, National Association
27 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery